£"" 

M 


PURCHASING 

ITS  ECONOMIC  ASPECTS 
AND   PROPER   METHODS 


BY 

H.   B.   TWYFORD 

II 

OTIS   ELEVATOR    COMPANY 


WITH 

CHARTS,    DIAGRAMS    AND    FORMS 


SECOND    PRINTING 
SECOND    THOUSAND 


NEW  YORK 

D.  VAN  NOSTRAND  COMPANY 

25  PARK  PLACE 

1915 


COPYRIGHT, 
BY    H.    B.    TWYFORD 


ACKNOWLEDGMENT 

The  author  acknowledges  with  appreciation  the  courtesy 
extended  to  him  by  the  undermentioned  concerns  some  of  whose 
forms  are  reproduced  in  this  book. 

LONDON  UNDERGROUND  ELECTRIC  RAILWAYS. 

OTIS  ELEVATOR  COMPANY. 

J.  G.  WHITE  AND  COMPANY. 

DAIRY  MACHINERY  AND  CONSTRUCTION  COMPANY. 


PREFAtl 

EVERY  business  establishment  in  the  normal 
course  of  its  operations  has  to  make  expenditures 
for  various  purposes  to  maintain  its  active  existence. 
Divergent  views  exist  as  to  the  relative  importance  of 
these  outlays.  This  is  evidenced  by  the  preponder- 
ance of  educational  efforts  directed  towards  obtaining 
better  results  from  the  amounts  expended  for  labor  and 
selling  expense,  while  other  subjects  are  comparatively 
neglected  or  receive  insufficient  consideration.  These 
studies  in  economics  are  having  far  reaching  effects  and 
it  is  the  object  of  this  book  to  draw  the  attention  to 
a  subject  which  has  been  but  little  touched  upon  in 
existing  literature  — the  economies  which  can  be 
effected  by  the  use  of  efficient  methods  in  the  purchas- 
ing of  materials,  goods,  and  supplies. 

Purchasing  is  one  of  the  primary  functions  in  the 
activities  of  the  great  complex  structure  we  call  busi- 
ness. The  acquisition  of  raw  material  is  the  initial 
step  incurred  in  the  cost  of  manufacturing  anything. 
In  merchandising,  a  purchase  must  be  made  before  a 
sale  can  be  effected.  In  construction  work,  tools  and 
equipment  must  be  procured  before  workmen  can 
commence  operations.  The  significance  of  this  subject 
is  brought  forcibly  to  the  attention  when  it  is  realized 
that  every  undertaking  in  its  inception  involves  the 
necessity  of  buying  something,  and  the  continuance 
of  its  activities  perpetuates  this  important  function. 


vi  PREFACE 

It  is  easily  conceivable  that  promiscuous  buying 
would  be  a  serious  handicap  to  the  success  of  any 
concern.  It  would  render  complete  success  unat- 
tainable, and  the  very  existence  of  an  establishment 
might  be  endangered  and  jeopardized.  For  the  efforts 
of  any  organization  to  culminate  in  the  most  desirable 
fruition,  it  is  a  predominant  constituent  principle 
that  its  expenditures  be  properly  regulated  and  made 
with  wisdom,  intelligence,  and  sagacity. 

Among  the  most  prominent  characteristics  which 
produced  the  commercial  prosperity  of  this  country 
were:  large  areas  of  fertile  lands,  enormous  deposits 
of  metals  and  minerals,  and  an  enthusiastic  and  am- 
bitious people.  There  are  today  three  other  factors 
which  make  necessary  a  thoughtful  consideration  of 
the  future.  These  are:  conservation  of  natural  re- 
sources, competition,  and  the  tendency  to  take  life 
easier  as  evidenced  by  the  agitation  for  shorter  hours 
for  workmen  and  longer  week  ends  for  employers. 

The  cumulative  effect  of  these  conditions  has 
brought  intensive  economical  operation  into  promi- 
nence, and  it  is  apparent  that  this  must  be  applied 
to  every  phase  of  business  to  a  greater  degree  as  time 
goes  on.  Regulated  and  right  buying  is  a  study  in 
economics,  and  vast  savings  can  be  effected  by  effi- 
cient and  proper  methods  of  performing  this  vital 
function. 

During  a  period  when  I  was  associated  with  one  of 
his  enterprises,  an  American  financier  with  an  inter- 
national reputation,  who  was  well  known  for  the 
successes  he  had  achieved  in  various  undertakings, 
expressed  some  opinions  to  me  on  buying  and  the 
economic  objects  to  be  attained  by  proper  methods. 


PREFACE  vii 

Among  other  things,  he  said  that  his  experience  had 
taught  him  that  the  problem  of  spending  money 
judiciously  and  to  good  purpose  was  a  harder  and 
more  difficult  task  than  the  acquisition  of  it.  At 
that  time  some  of  his  views  were  novel  to  me  and 
since  they  were  the  cause  of  considerable  reflection 
on  my  part,  they  were  possibly  the  nucleus  of  thoughts 
which  eventuated  in  this  effort. 

He  steadfastly  held  to  the  principle  that  a  success- 
ful foundation  for  new  enterprises,  the  growth  of  es- 
tablished undertakings,  and  the  accretion  to  their 
resources  is  in  a  large  measure  dependent  on  the 
importance  attached  to,  and  the  careful  thought  given 
to,  the  expenditure  of  all  money  for  capital  purposes, 
production,  and  supplies.  He  was  unflagging  in  dili- 
gently scrutinizing  and  carefully  weighing  such  ex- 
penditures, having  in  view  the  object  to  be  attained 
and  the  practical  utility  of  the  result  to  be  accom- 
plished by  the  outlay. 

Personal  experiences  and  struggles  with  the  prob- 
lems connected  with  purchasing  materials,  merchan- 
dise, supplies,  and  equipment,  and  in  organizing  and 
conducting  this  department  of  commercial  life,  to- 
gether with  a  close  study  of  the  interesting  economic 
questions  connected  with  it,  are  combined  and  repre- 
sented in  this  book.  It  is  hoped  that  some  of  the 
observations  made  or  the  information  given  may  be 
of  service  and  value  to  the  reader. 

H.  B.  TWYFORD 

NEW  YORK  CITY, 
April,  1915. 


CONTENTS 

PURCHASING 

CHAPTER  I 
PRINCIPLES  OF  PURCHASING.    GENERAL  CONSIDERATIONS 

The  art  of  buying.  Philosophy  of  buying.  Personality  in  buying. 
Some  present-day  methods.  Purchasing  an  interesting  economic 
problem 1 

CHAPTER  II 
FUNCTIONAL  POSITION  OF  PURCHASING  CONSIDERED 

Importance  of  good  buying  to  the  success  of  an  undertaking.  Rela- 
tion of  buying  to  cost  and  selling.  Influence  of  buying  on 
profits.  Literature  on  the  subject 11 

CHAPTER  III 
ETHICS  OF  BUYING 

Ethical  standards  in  purchasing.  Buyer  and  seller.  Misrepre- 
sentation and  its  results.  Contracts  and  price  fluctuations. 
Competitive  bidding.  Advantage  of  prompt  payments. 
The  offer  system 19 

THE  PURCHASING   ORGANIZATION 

CHAPTER  IV 
THE  PURCHASING  AGENT 

Factors  and  conditions  connected  with  his  work.  Information  and 
knowledge  which  he  must  possess.  The  principal  functions 
covered  by  his  activities.  His  authority  defined.  Relations 
with  other  department  heads 26 


X  CONTENTS 

CHAPTER  V 
THE  PURCHASING  DEPARTMENT 

Its  sphere  of  usefulness.  Size  of  department.  Employees  neces- 
sary. Relations  with  other  departments.  Subdividing  the 
department.  Traffic  division.  Inspecting.  Receiving  and 
storing 41 

CHAPTER  VI 

ORGANIZATION  OF  DEPARTMENT 

Organization  of  personnel.  Linking  up  the  employees.  Informa- 
tion clerk.  Requisition  clerk.  Price  clerk.  Order  clerk.  In- 
spectors. Invoice  clerks.  Traffic  clerk.  Storekeeper  ....  53 

CHAPTER  VII 

SYSTEM  OF  PROCEDURE 

General  outline.  Procedure  to  be  followed  in  collecting  information. 
Purchasing  procedure.  Invoice  procedure.  Stores  procedure. 
Inspection  procedure.  Traffic  procedure 62 


OPERATION  OF  PURCHASING  DEPARTMENT 

CHAPTER  VIII 
OBTAINING  AND  TABULATING  PROPER  RECORDS 

Collecting  and  recording  data  and  information.  Catalogues.  Sources 
of  supply.  Record  of  past  purchases.  The  purchase  record. 
Prices  and  quotations.  Specifications.  Inspection  reports. 
Analyses  and  tests 73 

CHAPTER  IX 

WORK  CONNECTED  WITH  REQUISITION  AND  ORDER 

Examining  and  checking  requisitions.  Pricing  requisitions.  Ob- 
taining quotations.  Final  negotiations.  Placing  orders. 
Following  up  orders.  Tickler  systems.  Recording  shipments. 
Emergency  orders 94 


CONTENTS  xi 

CHAPTER  X 
INVOICES  AND  METHOD  OF  HANDLING 

General  considerations.  Recording  invoices.  Preliminary  work. 
Checking  with  order.  Checking  with  material  received. 
Checking  prices.  Freight  charges.  Extensions.  Classifica- 
tion. Approval 116 

CHAPTER  XI 

OPERATION  OF  STORES 

General  remarks.  Receiving  material  and  supplies.  Properly 
storing.  Delivering  from  stores.  Stores  accounting.  Stores 
tickler  systems.  Scrap.  Fixing  the  maximum  and  minimum  133 

PURCHASING  AS  PRACTISED 
CHAPTER  XII 

PURCHASING    FOR    RAILROAD    CONSTRUCTION    WORK    AND    FOR 

OPERATION  OF  ELECTRIC  RAILROADS 162 

CHAPTER  XIII 

PURCHASING  FOR  A  MANUFACTURING  AND   CONSTRUCTION  COM- 
PANY      191 

CHAPTER  XIV 

PURCHASING   FOR   CONSTRUCTION    AND    OPERATION  IN  WIDELY 

SEPARATED  LOCALITIES 202 

CHAPTER  XV 
PURCHASING  FOR  A  SMALL  MANUFACTURING  ESTABLISHMENT.    .     220 

INDEX  233 


LIST  OF  CHARTS,  DIAGRAMS  AND  FORMS 

FIGURE  NO.  PAGE 

1.  Comparison  of  consequences  resulting  from  inefficient  buying 

and  competent  buying .  3 

2.  Diagram  illustrating  the  building  up  process  of  the  cost  of  'an 

article  until  the  selling  price  is  reached 13 

3.  Diagrammatic  synopsis  of  the  various  matters  on  which  a 

purchasing  agent  should  be  posted 30 

4.  Diagram  showing  in  tabular  form  the  main  divisions  of  a  pur- 

chasing agent's  work 35 

5.  Chart  of  the  functional  organization  of  a  purchasing  depart- 

ment   48 

6.  Chart  of  the  organization  of  personnel  of  a  purchasing  depart- 

ment   57 

7.  Chart  of  system  to  be  followed  in  obtaining  and  recording  data 

and  information 66 

8.  Chart  of  procedure  to  be  followed  from  time  requisition  is 

received  until  order  is  completed 67 

9.  Chart  of  method  of  procedure  for  invoices 68 

10.  Chart  of  stores  procedure 70 

11.  Arrangement  of  shelves  for  catalogues 76 

12.  Card  for  indexing  catalogues  under  name  of  material   ....  77 

13.  Card  for  indexing  catalogues  under  name  of  manufacturer  .    .  78 

14.  Sketch  of  bookcase  for  catalogues 79 

15.  Form  for  keeping  record  of  sources  of  supply 81 

16.  Record  of  material  purchased  form 83 

17.  Record  of  material  purchased  form 84 

18.  Purchase  record  form 86 

19.  Purchase  record  form 88 

20.  Record  of  quotations  form     90 

21.  Purchase  requisition 95 

22.  Form  of  inquiry  for  obtaining  quotations 99 

23.  Comparison  of  quotations  card 101 

24.  Form  for  notifying  bidders  that  order  is  placed 102 

25.  Purchase  order  form 106 

26.  Purchase  order  form  107 


xiv  LIST  OF  CHARTS 

27.  Acknowledgment  of  order 108 

28.  Card  for  tickler  system 109 

29.  Card  for  obtaining  promise  of  shipment 110 

30.  Form  of  request  for  information  regarding  shipment     ....  112 

31.  Invoice  record 120 

32.  Attachment  for  invoices  to  indicate  date  discount  expires    .    .  121 

33.  Form  for  certifying  invoices 122 

34.  Form  used  in  checking  and  approving  invoices 123 

35.  Method  of  recording  shipments  and  invoices  on  order  ....  125 

36.  Inspection  report 126 

37.  Material  received  sheet  for  use  in  purchasing  department    .    .  128 

38.  Notice  of  freight  charges 130 

39.  Material  received  sheet  for  use*  in  stores *L35 

40.  Material  received  sheet  for  use  in  accountant's  office   ....  137 

41.  Receiving  report 140 

42.  Requisition  on  storekeeper 142 

43.  Requisition  on  storekeeper 143 

44.  Requisition  on  storekeeper 144 

45.  Credit  slip  for  goods  returned  to  stores 145 

46.  Credit  slip  for  goods  returned  to  stores 146 

47.  Material  budget    . 147 

48.  Material  budget 149 

49.  Perpetual  inventory  for  stores 151 

50.  Perpetual  inventory  for  stores 153 

51.  Bin  ticket  for  use  in  stores 154 

52.  Temporary  bin  ticket 156 

53.  Stores  tickler  ticket 157 

54.  Stores  tickler  ticket     158 

55.  Report  of  low  stock 159 

56.  Notification  regarding  scrap 160 

57.  Requisition   used    on    Underground    Railways    construction 

work 165 

58.  Requisition  similar  to  Figure  57  but  a  different  series      .    .    .  166 

59.  Order  form,  Underground  Electric  Railways 167 

60.  Record  card,  Underground  Electric  Railways 169 

61.  Reverse  side  of  record  card  showing  method  of  recording 

invoices 170 

62.  Notice  accompanying  invoices  sent  out  for  approval     ....  171 

63.  Card  for  recording  sales  of  scrap,  old  equipment,  and  tools  .    .  172 

64.  Reverse  side  of  sales  card  for  invoices 174 

65.  Method  of  keeping  analyses  of  coals  offered  for  sale     ....  177 


LIST  OF  CHARTS  XV 

66.  Reverse  side  of  Figure  65  showing  method  of  recording  quan- 

tities available  and  prices 178 

67.  Advice  to  shippers  of  actual  weight  of  coal  received 179 

68.  Requisition  on  purchasing  agent,  used  in  operation  work     .    .  180 

69.  Inquiry  used  in  obtaining  quotations 181 

70.  Purchasing  agent's  order  form  used  in  operation  work     ...  182 

71.  General  record  of  orders .  183 

72.  Tickler  card 184 

73.  Reverse  side  of  tickler  card 185 

74.  Reminder  card 186 

75.  Requisition  on  storekeeper 187 

76.  Credit  for  material  returned  to  stores 188 

77.  Sheet  for  listing  goods  received  into  stores 189 

78.  Bin  card  for  stores 190 

79.  Requisition  from  factories 192 

80.  Requisition  from  departments 194 

81.  Purchase  order  form 195 

82.  Reverse  side  of  order  arranged  for  recording  receipt  of  goods  196 
'  83.   Branch  office  order  form 197 

84.  Quotation  request  form 198 

85.  Follow  up  on  orders 199 

86.  Purchase  order  record     201 

87.  Requisition  on  purchasing  agent 204 

88.  Purchase  order  form 207 

89.  Copy  of  order  showing  method  of  recording  invoices     ....  208 

90.  Request  for  price  after  order  is  issued 209 

91.  Specification  and  blue  print  request 210 

92.  Inspection  notice 211 

93.  Request  for  information  regarding  shipment 212 

94.  Temporary  follow  up  memorandum      213 

95.  Advice  sent  to  construction  office     214 

96.  Instructions  to  ship '. 214 

97.  Tracer  request 215 

98.  Request  for  correct  invoices 216 

99.  Memorandum  sent  out  with  invoices 217 

100.  Purchase  order  record     218 

101.  Invoice  register 219 

102.  Purchase  requisition 221 

103.  Price  card .    . 222 

104.  Purchase  order  form 223 

105.  Invoice  approval  form 224 


xvi  LIST  OF  CHARTS 

106.  Index  of  orders 225 

107.  Foreman's  requisition  on  storekeeper 227 

108.  Foreman's  credit  requisition 228 

109.  Perpetual  stores  record 229 

110.  Storekeeper's  notice  of  low  stock 230 

111.  Pattern  record  card 231 

112.  Movements  of  patterns  record  card 232 


PUECHASING 


CHAPTER  I 

PRINCIPLES  OF  PURCHASING — GENERAL 
CONSIDERATIONS 

The  Art  of  Buying 

THE  steady  advance  in  the  art  of  buying  has  been 
one  of  the  determining  factors  in  developing 
scientific  salesmanship.  It  is  no  longer  possible  for  a 
salesman  to  walk  into  a  modern  purchasing  office, 
and  carry  away  an  order  on  the  strength  of  a  few 
persuasive  arguments  and  statements  regarding  his 
goods. 

Today  the  buyer  sometimes  knows  more  about  the 
material  than  the  salesman.  He  should  certainly  be 
better  posted  as  to  its  suitability  for  his  particular 
requirements.  He  has  his  inspection  reports,  labora- 
tory analyses,  and  physical  tests  to  guide  him.  He 
has  records  regarding  past  performances  of  material, 
quantities  consumed,  and  probable  future  needs,  also 
estimates  as  to  the  available  supply  in  the  market. 

This  information  can  be  collected,  tabulated,  formu- 
lated, and  reduced  to  exact  knowledge  —  which  is  sci- 
ence. With  this  equipment  the  purchasing  power  is 
at  its  maximum,  while  the  salesmanship  required  is 
at  its  minimum.  Under  these  conditions  the  advan- 
tage is  with  the  buyer,  and  the  best  results  in  the 


2  PURCHASING 

matters  of  price,  quality,  terms,  and  delivery  are 
obtainable. 

To  put  this  into  practical  effect,  therefore,  it  is 
necessary  to  apply  systematically  the  knowledge  which 
the  purchaser  must  possess.  The  information  from 
which  this  knowledge  is  gleaned  is  acquired  and  stored 
by  the  purchasing  department  and  will  be  dealt  with 
in  later  chapters. 

To  emphasize  the  importance  of  this  subject,  ref- 
erence should  be  made  to  Figure  1,  where  the  conse- 
quences proceeding  from  a  policy  of  indifference  or 
carelessness  are  compared  in  parallel  with  the  results 
which  can  be  achieved  by  the  efficient  direction  and 
operation  of  the  function  of  buying. 

A  glance  down  the  first  column  will  demonstrate 
that  severe  losses  must  be  incurred  by  the  absence 
of  a  scientific  system  and  the  use  of  improper  methods, 
while  the  economic  benefits  and  larger  profits  to  be 
derived  from  a  reversal  of  this  policy  are  set  forth  in 
the  second  column. 

To  secure  these  advantages  it  is  essential  that 
certain  methods  pertaining  to  and  peculiar  to  the 
art  of  buying  should  be  in  force.  These  features  are 
made  a  special  object  of  study  and  an  exposition  of  them 
is  given.  Coupled  with  these  special  features  it  is 
imperative  that  a  proper  system  be  adopted  and  put 
into  practical  effect  and  the  activities  connected  with 
purchasing  be  governed  with  wisdom,  intelligence,  and 
sound  judgment.  These  conditions  prevailing,  the 
highest  standard  of  efficiency  can  be  maintained  and 
the  complete  benefits  and  advantages  secured. 

The  illimitable  ramifications  of  business  are  supported 
by  their  interdependence.  It  is  an  essential  concomi- 


Promiscuous  Buying 


Regulated  But/ing 


Poor  Prices 


L  owest  Prices  for  Quality 
Purchased 


Inferior  Quality 


Highest  Quality  for 
Prices  Paid 


Purchases  made  in  Excess 
or  short  of  Requirements 


Exact  Quantities  needed 
are  ordered 


Articles  substituted  for 
those  actually  bought 


Articles  purchased  are  those 
actually  Delivered 


Investment  in  Materials 
and  Supplies  excessive 


Minimum  Investment  in 
Materials  and  Supplies 


Erratic  Deliveries 


Deliveries  made  'in 
accordance  with  needs 


Unchecked,  incomplete 
or  excessive  Deliveries 


Exact  Quantities  ordered 
are  Delivered 


Im 


nproper/y  Checked 
nd  delayed  Invoice, 


Pro  per /y  checked  and 
Promptly  approved  Invoices 


Loss  of  Cash  Discounts 


Cash  Discounts  .secured 
by  passing  invoices  promptly 


Duplicate   Payment 
of  Invoices 


Security  against  over  payments 


Inefficient  Service,  Losses 
Extravagances 


Adequate  Service. 

Economical  Operation 


FIGURE  No.  1. — A  comparison  of  the  consequences  ensuing  from  inefficient 
buying  and  competent  buying. 


4  PURCHASING 

tant  to  the  building  up  of  this  complicated  structure 
that  the  specialist  in  any  one  of  its  interrelated  func- 
tions should  acquaint  himself,  to  as  large  an  extent  as 
possible,  with  the  workings  and  accomplishments  of  the 
others.  Purchasing  is  intimately  associated  and  iden- 
tified with  many  branches  and  divisions  of  business. 
It  is  incumbent  therefore  on  the  man  who  specializes  in 
it  to  maintain  his  general  knowledge  on  lines  of  the 
broadest  conception  to  enable  him  to  practice  his  art 
to  the  greatest  perfection. 

The  Philosophy  of  Buying 

Too  often  the  question  of  price  is  made  the  deter- 
mining factor  in  making  a  purchase  without  due  con- 
sideration being  given  to  the  other  phases  of  the 
transaction.  Price  and  quality  must  be  considered  to- 
gether. One  sometimes  bears  an  inverse  relation  to 
the  other.  High  cost  was  formerly  considered  an 
indication  of  high  quality,  but  for  one's  special  and 
particular  needs,  the  highest  quality  may  be  the 
cheapest.  Conversely,  a  material  which  graded  higher 
than  the  specification  might  not  be  equally  serviceable 
for  the  purpose  and  prove  the  most  expensive.  Its 
exact  measure  of  utility  and  therefore  its  value,  is  now 
determined  on  a  more  scientific  basis  than  formerly. 

The  action  of  materials,  during  the  manufacturing 
process  and  in  the  finished  product,  has  been  made 
the  object  of  accurate  study,  and  the  information  and 
knowledge  gained  from  this  study  have  enabled  the 
engineers  to  draw  specifications,  which,  when  issued  by 
the  purchasing  agent  to  bidders,  have  brought  offers 
of  material  that  will  give  the  most  effective  results 
and  be  most  serviceable. 


PRINCIPLES  OF  PURCHASING  5 

The  prime  essential  therefore  is  to  purchase  at  the  |X 
lowest  possible  price,  the  material  which  answers  most 
fully  to  these  requirements.  Definite  methods  of 
testing  should  be  stated.  Specifications  not  enforced 
are  worse  than  useless.  A  substituted  material  which 
had  characteristics  of  higher  intrinsic  value  than  speci- 
fied might  not  be  equivalent  to  the  specified  material 
from  a  utilitarian  point  of  view. 

These  are  approximate  definitions,  and  must  neces- 
sarily be  so  in  reviewing  the  subject  in  its  relation  to 
the  whole  field  of  buying,  but  each  individual  purchase 
can  be  weighed  and  examined  with  these  considera- 
tions in  view.  If  requisitions  are  received,  and  orders 
are  placed  without  reviewing  them,  it  is  an  inadequate 
method  of  procedure  and  is  merely  doing  a  commission 
house  business.  An  indefinite  number  of  specific  in- 
stances could  be  given  illustrating  the  importance  of 
obtaining  the  right  material  at  the  right  price,  but 
each  individual  case  has  to  be  decided  on  its  own 
merits  and  surroundings. 

Common-sense,  however,  must  be  used  in  deter- 
mining just  what  is  to  be  done  in  the  case  of  each 
purchase.  With  supplies  of  all  kinds  down  to  the 
most  infinitesimal  thing,  there  is  always  some  one 
thing  which  is  the  most  economical  as  a  purchase  for 
one's  particular  needs,  but  the  amount  involved  may 
be  trivial,  and  not  warrant  the  expenditure  of  more 
than  a  very  limited  amount  of  time.  There  have  been 
exhaustive  experiments  made  with  lubricants,  when 
the  annual  purchases  did  not  amount  to  as  much  as 
the  cost  of  the  experiments  in  the  same  period.  But, 
where  the  consumption  is  large,  it  is  imperative 
that  the  cost  of  the  lubricant,  the  cost  of  material 


6  PURCHASING 

worn  from  journals  and  brasses,  and  the  cost  of  power 
to  overcome  friction,  should  all  be  carefully  computed 
to  arrive  at  the  actual  value  for  the  specific  purpose. 

A  large  number  of  instances  could  be  cited,  but  the 
above  illustration  will  suffice  to  show  that  if  a  curve 
was  kept  of  the  usefulness  of  an  article  to  the  pur- 
chaser a  curve  of  the  proper  price  to  be  paid  would 
bear  a  parallel  relation  to  it. 

Where  the  purchases  of  one  class  of  material  are 
sufficiently  large  to  warrant  it,  the  orders  should  be 
distributed  between  two  or  more  concerns,  as  a  meas- 
ure of  safety.  For  obvious  reasons  it  is  not  advisable 
to  have  all  one's  eggs  in  one  basket.  This  should  not 
be  done,  however,  at  a  sacrifice  of  price  or  quality 
unless  there  are  extremely  urgent  and  imperative  con- 
siderations warranting  such  a  course  of  action. 

If  the  material  in  question  is  one  of  the  essentials 
in  production  work,  and  the  supply  is  coming  entirely 
from  one  source,  a  serious  dislocation  of  operations 
might  ensue  from  the  failure  of  this  one  source  of 
supply  from  any  cause,  even  if  only  temporary.  For 
this  reason,  it  is  advisable,  wherever  possible,  to  draw 
supplies  from  as  widely  separated  localities  as  the 
conditions  will  permit.  The  risk  is  then  minimized 
from  such  causes  as  strikes,  lockouts,  and  breakdown 
of  transportation  facilities.  Dependable  sources  of 
supply  being  necessary  to  successful  buying,  it  is  im- 
perative that  the  reliability  and  standing  of  the  seller 
be  known  or  investigated  and  his  ability  to  perform 
the  obligations  he  is  entering  into  determined. 

This  brings  into  the  subject  of  right  buying  the 
question  of  buying  in  such  a  way  and  in  such  places 
and  from  such  sources  as  can  be  definitely  and  posi- 


PRINCIPLES  OF  PURCHASING  7 

tively  relied  upon  to  furnish  the  goods  and  materials 
required  at  the  time  they  are  required,  and  in  the 
quantity  required,  both  of  which  are  important  eco- 
nomic factors  in  the  operation  of  any  establishment, 
or  in  the  carrying  out  of  construction  work. 

Buying  at  inopportune  times  or  in  excess  of  require- 
ments is  liable  to  entail  severe  losses  unless  there  are 
compensating  advantages  in  the  matter  of  price.  An 
accumulation  of  goods  or  supplies  beyond  what  is  req- 
uisite to  keep  the  business  moving  along  its  appointed 
way,  means  that  the  following  losses  are  incurred;  de- 
preciation, insurance,  value  of  space  occupied,  and  loss 
of  interest  on  investment. 

Personality  in  Buying 

Personal  contact  between  buyer  and  seller  is  not  the 
potent  factor  it  once  was.  This  is  due  to  the  preva- 
lence of  more  scientific  conditions  in  buying.  A 
perfectly  satisfactory  purchase  can  be  put  through 
without  the  two  principals  in  the  negotiation  ever 
seeing  each  other.  Personality  is  just  as  powerful  as 
ever  in  the  consummation  of  the  deal,  but  it  works 
on  different  lines.  Business  men  will  probably  never 
cease  meeting  each  other  to  discuss  and  close  transac- 
tions, but  personal  contact  in  business  is  like  personal 
combat  in  war,  it  is  a  waning  influence  in  arriving  at 
a  decision.  The  tendency  is  in  this  direction  in  buy- 
ing. Salesmanship  is  on  a  more  impersonal  basis  than 
formerly.  The  great  mail-order  houses  are  examples 
of  this,  so  are  the  slot  machines. 

A  good  buyer  soon  gets  to  know  whether  the  seller 
has  scientific  and  exact  costs.  If  he  has,  the  buyer  can 
always  tell  when  he  has  reached  his  bottom  figure.  A 


8  PURCHASING 

man  uncertain  of  his  costs  is  uncertain  of  the  price 
he  quotes.  In  the  case  of  the  man  who  has  exact 
costs,  the  buyer  in  negotiating  might  think  he  could 
call  a  bluff  on  him,  and  offer  him  the  order  at  a  reduced 
price.  It  would  not  be  successful;  there  was  no  bluff; 
it  did  not  exist. 

Probably  every  successful  buyer  recognizes  the  prin- 
ciples of  good  buying,  and  although  he  may  not  have 
formulated  and  arranged  them  in  his  mind,  neverthe- 
less, he  has  undoubtedly  a  standard  by  which  he  does 
his  buying,  and  maxims  which  he  instinctively  lives 
up  to. 

Some  Present  Day  Methods 

There  are  thousands  of  manufacturers  in  this 
country  today  who  are  doing  hand-to-mouth  buying 
with  no  well-developed  scheme  for  making  their  pur- 
chases. They  have  some  local  jobber  or  near-by 
manufacturer  supply  their  needs  as  required,  some- 
times almost  day  to  day,  with  such  things  as  a  gross 
of  files,  or  some  emery  paper,  or  a  few  bars  of  steel. 
Their  contention  is  that  it  is  not  worth  bothering  about; 
the  local  jobber  carries  the  stock  for  them,  and  that  is 
worth  the  little  extra  money  they  pay  him.  They 
will  also  say  they  want  to  patronize  the  local  dealers. 

It  is  possible  for  them  to  continue  to  place  their 
orders  locally,  but  let  them  do  it  intelligently.  Let 
them  keep  an  accurate  account  of  everything  they 
use  during  one  year,  and  the  following  year  ask  for 
quotations  from  the  biggest  and  best  manufacturers 
in  the  country.  They  will  find  they  can  save  enough 
money  to  enable  them  to  carry  their  own  stocks  and 
have  a  handsome  profit  left.  They  will  not  have  to 


PRINCIPLES  OF  PURCHASING  9 

place  their  order  for  a  year's  supply  to  be  delivered 
at  once,  the  sellers  will  make  shipments  almost  as 
required.  However,  most  of  their  orders  will  probably 
still  go  to  the  local  jobber,  because  the  result  of  this 
policy  will  be  to  awaken  the  jobber  to  the  fact  that 
he  has  not  been  buying  right,  and  he  will  be  able  to 
get  better  figures,  which  will  enable  him  to  retain  the 
business.  It  all  resolves  itself  down  to  this,  that 
thousands  of  manufacturers  are  letting  some  one  else 
do  their  buying  instead  of  doing  it  themselves,  and 
that  some  one  else  may  be  a  good  buyer,  but  the 
chances  are  he  is  not. 

Purchasing  an  Interesting  Economic  Study 

The  interest  in  the  subject  of  buying  is  not  confined 
to  the  inherent  satisfaction  which  any  man  experi- 
ences when  he  has  brought  a  negotiation  to  a  success- 
ful conclusion.  It  is  heightened  by  the  wide  field 
there  is  and  by  the  constant  changes  taking  place  in 
all  classes  of  goods  as  they  pass  through  one  plant 
after  another.  The  numerous  processes  through  which 
various  materials  go  before  final  consumption,  cause 
these  to  be  considered  by  one  manufacturer  as  fin- 
ished product,  while  to  another  they  are  raw  material.. 
This  is  due  to  the  great  complexity  of  our  manufac- 
turing industries. 

The  enterprises  not  strictly  of  a  manufacturing 
character,  such  as  public  utilities,  mining,  etc.,  cover 
a  very  wide  field,  and  their  activities  require  the 
purchase  of  supplies  and  material,  equally  as  varied 
and  complex  as  the  manufacturing  industries.  For 
this  reason  a  study  of  the  subject  offers  great  diversity 


10  PURCHASING 

and  is  of  particular  interest  and  attractiveness.  Men 
have  specialized  in  various  phases  of  the  work,  just 
as  engineers  and  doctors  have  in  their  professions. 
The  fundamental  underlying  principles,  however, 
governing  the  conduct  of  the  work  and  the  methods 
employed  for  its  accomplishment  remain  the  same, 
whatever  the  nature  and  scope  of  the  undertaking. 

Economy  of  time  and  materials  will  never  go  out  of 
fashion,  and  the  saving  which  can  be  effected  in  the 
purchasing  of  materials,  supplies,  merchandise,  and 
equipment,  is  an  economic  problem,  the  investigation 
of  which  will  amply  repay  any  person  interested 
in  it. 


CHAPTER  II 

FUNCTIONAL  POSITION  OF  PURCHASING  CONSIDERED 

Importance  of  Good  Buying  to  the  Success  of  an  Under- 
taking 

NO  great  commercial  enterprise  has  been  built  up, 
or  is  continued  in  active  operation,  without  the 
expenditure  of  large  sums  of  money.  Comparatively, 
this  is  equally  true  of  every  business  large  or  small. 
This  expenditure  is  in  a  measure  a  foundation,  in 
a  sense  it  may  be  said  to  be  the  corner  stone,  for 
without  this  the  erection  and  superstructure  of  the 
enterprise  cannot  progress.  The  purchasing  depart-  ^ 
ment  of  a  business  is  the  instrument  through  which  a 
large  proportion  of  the  expenditure  is  made,  and  the 
success  of  the  business  will  be  affected  by  the  amount 
of  correct  thought  given  to  this  department,  and  the 
judiciousness  with  which  the  purchases  are  made. 

The  success  or  failure  of  a  business  may  be  the 
direct  result  of  good  or  bad  buying.  This  is  easily 
conceivable  if  one  studies  the  consequences  which 
either  one  or  the  other  involves,  as  set  forth  in  paral- 
lel in  Figure  1.  The  importance  of  the  function  of 
buying  can  be  readily  understood  from  it,  and  any 
establishment  indifferent  to  it  would  need  to  make 
enormous  profits,  have  little  competition,  and  unlim- 
ited capital  to  survive  any  length  of  time. 

There  is  too  great  a  tendency  in  some  concerns  to 
belittle  the  purchasing  and  treat  it  in  a  negligent  and 


12  PURCHASING 

offhand  manner,  but  this  is  a  very  narrow  view.  It 
is,  however,  held  by  the  heads  of  many  of  the  medium 
sized  and  smaller  industries  who  have  perverted  ideas 
as  to  the  relative  importance  of  the  various  sections 
of  their  business. 

They  will  not  spare  expense  in  an  endeavor  to  in- 
crease the  results  obtainable  from  the  sales  depart- 
ment, or  to  develop  the  effectiveness  of  the  production 
division.  There  they  can  see  tangible  results,  whereas 
their  vision  does  not  penetrate  far  enough  in  the  other 
direction  to  appreciate  the  benefits  to  be  derived  from 
the  scientific  control  of  purchases.  Without  such  con- 
trol the  advantages  are  intangible,  but  they  can  be 
brought  out  forcibly  and  succinctly  by  a  complete 
and  concise  system,  and  the  proper  regulation  of  the 
buying  and  all  that  pertains  to  it.  Results  can  then 
be  set  forth  as  clearly  as  in  the  sales  or  production 
department. 

Many  thousands  of  manufacturers  hold  views  of 
buying  which  are  detrimental  to  their  interests,  but 
fortunately  opposite  views  are  held  by  our  national 
"  captains  of  industry "  and  by  all  men  who  give 
business  organization  close  attention.  Studious  reflec- 
tion and  investigation  by  others  cannot  fail  to  bring 
to  them  a  realization  of  the  importance  and  relative 
standing  of  this  vital  function  of  their  business. 

While  stress  has  been  laid  on  the  importance  of  the 
function  of  buying,  it  must  not  be  forgotten  that  it  is 
a  component  part  of  the  activities  of  the  concern  as 
a  whole.  Any  purchasing  agent  having  a  distorted 
or  exaggerated  idea  of  the  importance  of  the  functions 
of  his  department,  will  not  be  able  to  do  the  most 
efficacious  work  in  his  sphere  of  usefulness,  and  will 


FUNCTIONAL  POSITION  OF  PURCHASING        13 


unconsciously  hamper  the  efforts  of  the  heads  of 
other  departments,  resulting  in  an  unbalanced  admin- 
istration. 

The  Relation  of  Buying  to  Cost  and  Selling 

The  great  importance  of  good  buying  is  empha- 
sized by  the  fact  that  a  large  percentage  of  the  profits 
of  any  concern  is  absolutely  and  undoubtedly  due  to 
the  ability  of  the  purchasing  agent  to  buy  the  be£t 


22  % 

Indirect* 

;  Expense' 


FIGURE  No.  2. — This  diagram  illustrates  the  building  up  process  of  the  cost 
of  an  article  until  the  selling  price  is  reached.  Perhaps  no  two  articles 
would  show  identical  rises  for  each  step  but  all  would  show  a  succession 
of  unequal  advances  from  zero  to  100%. 


14  PURCHASING 

from  a  utilitarian  point  of  view  for  the  lowest  price. 
This  is  the  first  step  in  the  profits. 

Figure  2  indicates  the  five  main  stages  by  which 
a  product  reaches  its  selling  price.  Subdivisions 
of  each  stage  could  be  given,  but  as  an  illustration 
for  the  present  purpose  the  above  is  sufficient.  It  is 
made  up  from  actual  conditions  existing  in  a  manu- 
facturing establishment,  and  serves  to  show  the  im- 
portance of  starting  right  by  buying  right. 

The  acquisition  of  raw  material  is  the  initial  step 
incurred  in  the  cost  of  making  anything  and  the  rela- 
tion of  its  percentage  to  the  final  selling  price  will 
depend  on  the  nature  of  the  output  of  the  factory. 
If  valuable  metals  are  used  for  raw  material  the  first 
step  would  be  an  exceptionally  high  one,  but  the 
reverse  would  be  the  case  if  cheap  crude  raw  material 
was  used  and  a  highly  finished  product  turned  out. 
The  production  of  almost  any  finished  article  means 
that  the  material  in  it  has  been  bought  and  sold  many 
times  because  manufacturing  industries  are  interre- 
lated to  such  an  extent.  This  causes  great  variation 
in  the  cost  of  the  raw  material  one  starts  with,  but 
emphasizes  the  importance  of  closely  watching  the 
price  and  scrutinizing  the  quality. 

It  must  not  be  forgotten  that  the  activities  of  the 
purchasing  agent  do  not  end  with  the  first  step  shown 
in  Figure  2.  Indirect  expense  includes  considerable 
quantities  of  material  used  in  maintenance  and  repair 
work.  There  are  supplies  of  all  kinds,  such  as  oils, 
brooms,  packing  material,  and  office  supplies.  The 
selling  expense  includes  stationery,  catalogues,  etc., 
therefore,  buying  is  a  factor  in  each  of  the  stages 
shown. 


FUNCTIONAL  POSITION  OF  PURCHASING        15 

Reference  has  already  been  made  to  the  importance 
of  so  directing,  arranging,  and  controlling  all  purchases, 
that  without  an  undue  accumulation  of  materials  there 
should  be  at  all  times  sufficient  stock  on  hand  to 
enable  the  production  department  to  maintain  its 
activities  in  unbroken  continuity.  This  has  a  direct 
influence  on  the  cost  of  a  manufactured  article,  for  the 
losses  incurred  through  overstocking  increase  the  in- 
direct expense,  as  do  likewise  the  losses  sustained  from 
an  insufficient  supply  of  materials  and  the  consequent 
decrease  in  the  output  of  the  factory, 

Influence  of  Buying  on  Profits 

Regulated  and  right  buying  is  a  study  in  economics. 
If  one  looks  over  the  field  of  endeavor  connected  with 
production  and  manufacturing,  and  observes  its  ten- 
dencies during  the  past  few  decades,  it  will  be  noticed 
that  intensive  economical  operation  is  applied  more 
closely  as  time  goes  on,  until  a  condition  exists  with 
many  concerns,  where  they  save  their  profits  instead 
of  making  them,  or  rather  they  make  their  profits  by 
savings.  It  does  not  appear  that  there  will  be  any 
lessening  of  this  tendency.  This  country,  rich  in 
natural  resources,  with  a  nation  of  born  salesmen  and 
advertisers,  has,  heretofore,  solved  the  problem  of 
getting  more  profit  by  making  more  sales.  Conserva- 
tion of  natural  resources  and  competition  have  forced 
a  realization  that  an  increase  of  advertising  and  selling 
expense  will  not  continue  to  increase  the  business,  in 
proper  proportion  to  this  increase  of  expense.  Hence 
the  necessity  for  reducing  costs.  Right  buying  strikes 
at  the  very  root  of  the  problem  as  its  economic  value 
has  a  vital  bearing  on  the  cost  of  production. 


16  PURCHASING 

The  profit  on  any  manufactured  article  is  not  de- 
termined by  the  price  as  much  as  it  is  by  the  cost. 
The  selling  price  is  fixed  by  the  demands  of  the  public 
and  competition.  The  first  effort  usually  made  to 
widen  the  difference  between  cost  and  price  is  to 
increase  the  output  by  encouraging  the  demand 
through  advertising  and  more  scientific  salesmanship. 
When  the  limit  is  reached  in  this  direction,  recourse 
is  had  to  investigating  reduction  of  costs.  In  cost 
reduction,  the  principal  attack  is  made  on  the  labor 
item.  In  the  days  of  primitive  manufacturing,  labor 
and  material  were  the  only  two  items  considered  in 
computing  costs,  but  today  labor  costs  frequently 
hold  third  place,  indirect  expense  and  material  being 
the  two  which  rank  ahead  of  it.  Efficient  methods  of 
reducing  these  should  go  hand  in  hand  with  the 
efforts  directed  at  labor  costs.  To  reduce  the  cost  of 
materials,  an  effective  system  of  buying  is  compulsory, 
if  the  best  results  are  to  be  obtained. 

Literature  of  Buying 

If  the  catalogues  of  any  of  the  well-known  pub- 
lishers of  technical  and  scientific  books  are  consulted, 
one  can  find  plenty  of  books  devoted  to  the  problem 
of  reducing  labor  costs,  but  comparatively  little  litera- 
ture can  be  found  on  the  subject  of  scientific  methods 
of  buying.  It  is  an  economic  study  which  is  deserv- 
ing of  more  attention  than  it  receives.  In  some  of  the 
books  published  on  business  management,  due  recogni- 
tion is  given  to  the  subject,  while  in  others  it  is  treated 
in  a  cursory  manner. 

The  paucity  of  literature  on  the  philosophy  of  buy- 
ing is  further  accentuated  by  taking  a  concrete  case, 


FUNCTIONAL  POSITION  OF    PURCHASING       17 

which  will  illustrate  the  relative  importance  of  this 
subject  to  other  allied  economic  studies. 

It  has  already  been  pointed  out  that,  in  any  fin- 
ished manufactured  article,  the  value  of  the  raw 
material  may  have  been  insignificant  compared  with 
the  labor  costs.  The  opposite  may  be  the  case,  espe- 
cially where  valuable  metals  are  manipulated.  The 
labor  costs  are  then  much  lower  than  the  cost  of  the 
raw  material  which  enters  into  the  product.  Take 
for  instance  an  article,  the  actual  cost  of  which  is 
sixteen  dollars,  that  is,  without  any  percentage  added 
for  indirect  expense.  Assuming  that  these  sixteen  dol- 
lars comprise  nine  dollars  for  material  and  seven 
dollars  for  labor,  why  should  there  not  be  an  equal 
amount  of  educational  literature  directed  to  effecting 
a  saving  on  the  nine  as  on  the  seven  dollars? 

It  is  apparent  that  this  is  not  done,  yet  it  will  in- 
variably be  found  that  the  application  of  scientific 
methods  in  purchasing  is  equally  beneficial  in  affect- 
ing a  reduction  in  raw  material  costs  as  similar  methods 
are  hi  labor  costs.  No  two  industries  will  show  the 
same  proportion  of  labor  and  material  entering  into 
a  finished  product,  but  the  foregoing  is  a  fair  assump- 
tion, and  it  seems  incredible  that  one  item  is  selected 
for  criticism  and  discussion,  and  is  made  the  subject 
of  profound  study  with  many  volumes  devoted  to  it, 
while  the  other  is  treated  as  a  negligible  quantity. 

Constructive  thinking  in  its  application  to  the  pro- 
duction department  has  been  elaborated  on  in  many 
volumes,  and  in  the  technical  journals  and  periodicals. 
The  literature  on  the  art  of  salesmanship  is  volumi- 
nous and  highly  scientific.  The  problems  connected 
with  accounting  methods  have  been  analyzed  and  dis- 


18  PURCHASING 

cussed  exhaustively.  The  intricacies  of  finance  have 
been  sifted  and  examined,  and  placed  before  students 
of  the  subject  in  an  interesting  and  attractive  form. 
This  is  in  contradistinction  to  the  literature  devoted 
to  the  philosophy  and  art  of  buying,  which  is  neither 
extensive  nor  exhaustive,  although  it  is  a  subject  of 
equal  importance  and  is  an  attractive  and  alluring 
study. 


CHAPTER  III 
ETHICS  OF  BUYING 

Ethical  Standards  in  Purchasing 

ALL  undertakings  and  enterprises  which  work  in 
the  field  of  manufacturing,  transportation,  or 
merchandising,  whatever  their  scope,  character,  or 
nature,  are  divided  into  departments  for  administra- 
tion purposes,  and  the  greatest  success  which  can  be 
achieved  in  the  conduct  of  the  whole,  is  by  the  prac- 
tice of  the  Golden  Rule.  It  naturally  follows,  that 
to  make  this  policy  potently  operative,  each  depart- 
ment must  work  in  unity  and  conformation  with  it. 
In  no  section  of  the  business  is  it  more  essential  to 
keep  this  strictly  in  view  than  in  the  purchasing. 

The  maintenance  of  a  high  standard  of  conduct  in 
purchasing  raw  material  will  have  its  influence  on  the 
conversion  of  them  by  the  production  department 
into  the  finished  product,  and  on  their  final  disposal 
by  the  sales  department.  The  influence  of  this  policy 
will  permeate  all  transactions  which  may  take  place 
subsequent  to  the  actual  purchase  of  materials  and 
supplies,  or  of  goods  for  resale. 

The  old  saying,  " Goods  well  bought  are  half  sold" 
has  been  interpreted  in  many  ways,  the  construction 
placed  on  the  word  "well"  being  the  bone  of  conten- 
tion. It  has  frequently  been  asserted  that  "well 
bought"  means  cheaply  bought,  the  inference  being 
that,  if  bought  cheap  enough,  a  ready  market  can  be 


20  PURCHASING 

found  at  a  profit.  Also  it  has  been  construed  to  mean 
that  it  was  a  good  buy,  because  a  market  existed 
where  the  goods  could  be  quickly  disposed  of.  Again 
it  has  been  defined  as  obtaining  material  which  was 
needed  for  manufacturing  purposes,  and  of  which  a 
limited  supply  existed,  the  buyer  congratulating  him- 
self on  securing  the  articles  in  competition  with 
another  purchaser. 

The  expression  "well  bought"  means  all  of  these 
things  and  something  more.  The  best  has  not  been 
done,  the  maximum  efficiency  has  not  been  reached, 
unless  the  purchase  has  been  made  with  the  knowl- 
edge, that  there  is  a  channel  for  its  disposition,  that 
the  price  paid  is  the  lowest  obtainable  for  the  quality 
bought,  and  that  some  good  purpose  has  been  served 
both  buyer  and  seller  by  the  consummation  of  the 
transaction.  To  those  who  think  this  idealistic,  it  is 
none  the  less  true,  and  particularly  is  it  true  where 
the  other  fellow's  extremity  is  your  opportunity. 

A  policy  such  as  advocated  does  not  preclude  the 
use  of  every  maneuver  which  has  for  its  object  the 
consummation  of  the  purchase  of  goods  and  materials 
at  the  lowest  possible  price,  or  rather  of  the  right 
goods  at  the  right  price.  Until  this  object  is  attained 
every  move  which  good  diplomacy  may  suggest  should 
be  brought  into  play.  The  accomplishment  of  the 
desired  end  along  such  lines  will  redound  to  the  credit 
of  both  buyer  and  seller,  to  the  department,  to  the 
concern  as  a  whole,  and  to  the  universal  standard  of 
business  dealings. 


ETHICS  OF  BUYING  21 

Buyer  and  Seller 

When  the  man  with  whom  a  negotiation  is  being 
carried  on  knows  he  is  going  to  receive  a  square  deal, 
his  inclinations  will  tend  towards  giving  one.  There 
are  skeptics  on  this  point  who  will  quote  instances 
where  contrary  results  apparently  ensued  from  the 
adoption  of  this  policy,  nevertheless,  if  it  is  consist- 
ently followed,  it  will  win  in  the  long  run.  If  what  is 
generally  known  as  "  sharp  practices "  are  resorted  to 
by  one  party  to  a  negotiation,  it  is  not  necessary  for 
the  other  party  to  use  similar  tactics  to  combat  them. 

One  frequently  hears  the  expression,  "  There  is  no 
sentiment  in  business."  Too  often  the  meaning  im- 
plied is  that  no  unselfish  motives  exist.  But  this  is 
not  so.  Evidence  is  abundant  to  the  contrary.  Many 
true  friendships  have  been  formed  between  buyers  and 
sellers,  but  ulterior  motives  have  been  ascribed  to 
them.  Business  acts  are  always  accompanied  by  feel- 
ings and  motives  of  some  sort,  and  these  are  not 
wholly  selfish. 

It  must  be  remembered  that  there  are  ethics  of 
selling  as  well  as  of  buying.  Business  houses  of  estab- 
lished repute  will  jealously  and  assiduously  protect 
their  reputations,  and  in  dealing  with  them,  mutual 
suspicion  and  distrust  can  have  no  place.  The  buyer 
with  the  highest  standards  of  honor  and  conduct 
governing  his  motives  and  actions  is  going  to  be  met 
in  like  manner,  for  the  fundamental  principles  of 
both  parties  to  the  transaction  will  be  identical. 

Honesty  is  interpreted  in  Webster's  dictionary  to 
mean  "A  nice  sense  of  allegiance  to  the  standards  of 
one's  profession,  calling,  or  position,"  and  this  is  about 


22  PURCHASING 

as  good  a  definition  as  can  be  given  of  the  purchas- 
ing agent's  attitude,  to  his  coworkers  in  the  establish- 
ment, and  to  all  men  he  meets  in  his  multifarious 
duties  and  transactions. 

Misrepresentation  and  Its  Results 

If  by  some  trick  or  misrepresentation  a  seller  has 
been  inveigled  into  accepting  an  order  by  which  he 
stands  to  lose  money,  he  will  invariably  begin  to 
figure  how  he  can  evade  the  terms  of  the  contract 
either  in  quality  or  quantity,  in  such  a  manner  as  to 
deceive  the  buyer,  to  enable  him  to  break  even. 

A  loosely  worded  inquiry  has  been  known  to  give 
a  false  impression  as  to  quantity  of  goods  required, 
and  when  sent  out  broadcast,  has  brought  so  many 
salesmen,  some  from  long  distances,  to  the  buyer's 
office  that  the  combined  value  of  their  time  and 
expenses  exceeded  the  value  of  the  order. 

This  expense  must  eventually  be  charged  to  the 
cost  of  goods  and  paid  for  by  the  buyer.  It  is  a  prob- 
lem which  can  be  met  by  more  scientific  methods. 
There  should  be  no  intent  to  deceive,  nor  should  the 
inquiry  be  sent  for  spectacular  effect  to  firms  who  are 
not  prepared  to  bid. 

Contracts  and  Price  Fluctuations 

Every  arrangement  or  agreement  made  between 
buyer  and  seller  is  a  contract,  and  is  in  force  until 
completed  in  accordance  with  its  terms  and  condi- 
tions or  until  mutually  abrogated.  Price  fluctuations 
have  been  the  cause  of  many  failures  to  live  up  to 
agreements,  as  have  also  other  conditions,  which  have 


ETHICS  OF  BUYING  23 

arisen  and  intervened  to  the  advantage  of  one  party 
and  the  disadvantage  of  the  other. 

Unfortunately  we  cannot  do  business  in  the  same 
manner  as  it  is  still  practised  by  the  Chinese  in  some 
parts  of  their  country,  where  obligations  to  buy  and 
sell  are  entered  into  verbally  and  the  fulfilment 
strictly  and  rigidly  adhered  to  even  if  the  life  of  the 
agreement  extends  over  a  period  of  years,  and  factors 
have  arisen  in  the  meantime  which  are  detrimental 
to  one  of  the  parties. 

Competitive  Bidding 

The  principle  of  competitive  bidding  must  be  kept 
alive;  if  it  is  abused  it  will  react  on  the  buyer  and 
destroy  this  useful  and  necessary  function  to  the 
general  scheme  of  buying.  Competition  is  the  life  of 
trade.  If  manufacturers  and  others  quoting  by  solici- 
tation are  not  treated  fairly  and  impartially,  they  will 
soon  become  acquainted  with  the  fact.  Eventually 
this  will  prove  detrimental  to  the  buyer  and  render  it 
impossible  for  him  to  maintain  the  highest  standard 
of  efficiency. 

Quotations  made  by  the  seller  to  the  buyer  are  for 
him  alone  and  should  be  regarded  as  confidential. 
To  disclose  these  prices  to  a  competitor  may  seem  to 
serve  a  temporary  advantage,  but  eventually  such  a 
practice  will  hurt  the  purchaser  and  his  concern. 

Advantage  of  Prompt  Payments 

A  purchase  is  always  made  with  an  agreed  date  for 
payment,  and  a  scrupulous  regard  should  be  had  for 
this  and  the  obligation  liquidated  as  specified.  A 


24  PURCHASING 

seller  is  entitled  to  his  money  exactly  in  accordance 
with  the  agreement,  if  he  has  fulfilled  his  part  of  the 
bargain.  A  concern  whose  purchases  were  very  large, 
and  who  habitually  held  back  payments  even  for  a 
limited  time  beyond  the  agreed  date,  would  be  taking 
an  unfair  advantage  and  possibly  putting  the  seller 
to  considerable  inconvenience.  Some  slight  advantage 
might  be  gained  by  the  financial  department  of  the 
buying  concern,  but  this  would  be  more  than  lost  in 
the  purchasing  department.  It  is  a  known  quantity 
of  power  on  the  side  of  the  purchasing  agent,  when 
the  seller  positively  knows  that  the  agreed  date  for 
payment  will  be  strictly  adhered  to. 

The  Offer  System 

There  are  innumerable  expedients  familiar  to  every 
experienced  buyer,  the  knowledge  of  which  can  only 
be  gained  by  contact  with  the  actual  work.  It  would 
be  impossible  to  enumerate  them  all,  only  some  broad 
governing  principles  are  given.  Some  are  to  be 
avoided.  As  an  illustration  there  is  the  " offer"  system. 
This  is  when  a  quotation  has  been  given  and  it  is  the 
lowest  that  can  be  obtained  and  the  order  is  offered 
at  a  still  lower  price.  If  habitually  practised,  all 
prices  quoted  will  eventually  be  on  a  basis  that  can 
be  scaled. 

Purchasing  and  selling  have  built  up  the  complex 
structure  we  call  business,  with  its  interminable  rami- 
fications. A  finished  article  ready  for  consumption  or 
use  is  the  result  of  successive  buying  and  selling  just 
in  proportion  to  the  numbers  of  its  component  parts. 
This  process  goes  back,  widening  and  spreading  until 
it  reaches  the  original  raw  material.  Is  it  too  much  to 


ETHICS  OF  BUYING  25 

ask  that  through  all  these  transactions  a  standard 
of  honesty  should  be  maintained  which  will  be  recog- 
nized and  accepted  by  everybody  concerned? 

Every  purchase  concluded  on  right  lines  strengthens 
the  position  of  the  establishment  it  is  for,  and  is 
helping  towards  the  attainment  of  perfection  in  busi- 
ness intercourse,  the  upbuilding  of  national  industries, 
and  international  trade  and  commerce. 


CHAPTER  IV 

THE  PURCHASING  AGENT 

Factors  and  Conditions  Connected  with  his  Work 

THE  development  in  the  art  and  importance  of 
buying  has  brought  into  prominence  the  men 
in  charge  of  this  work,  and  they  now  hold  a  recog- 
nized position  of  distinction  and  consequence  in  all 
commercial  undertakings. 

It  has  been  stated  that  there  is  no  such  thing  as 
scientific  buying,  but  that  good  buying  is  the  result 
of  intuitively  knowing  when  and  how  to  do  it,  which, 
with  a  combination  of  luck,  makes  a  successful  buyer. 
It  can  be  admitted  that  with  this  equipment  a  suc- 
cessful gambler  may  be  evolved,  but  intuition  is  too 
vague  a  qualification  for  the  purchasing  agent  of  any 
establishment,  large  or  small.  There  is  a  great  deal 
more  necessary  in  the  make-up  of  any  man  who  has 
charge  of  such  work  as  is  being  considered  here.  He 
should  have  good  judgment,  be  well  balanced,  shrewd, 
sagacious,  andwell  fortified  with  the  knowledge  which 
he  can  sci§8!iTOalry  accumulate;  this,  broadened  and 
improved  by  a  close  study  of  local  and  national  con- 
ditions, will  make  a  purchasing  agent  a  valuable  asset 
to  any  concern. 

The  unique  position  occupied  by  the  purchasing 
agent  brings  him  into  close  touch  with  all  depart- 
ments of  a  business.  For  this  reason  he  is  often  more 
intimately  acquainted  with  its  life,  growth,  and  devel- 


THE  PURCHASING  AGENT  27 

opment,  and  has  a  better  knowledge  of  its  needs  and 
requirements,  than  probably  any  other  department 
head  in  the  concern.  From  this  it  can  be  deduced 
that  the  purchasing  agent  has  opportunities  enjoyed 
by  few  other  men  in  the  organization  for  attaining 
the  highest  executive  positions.  In  some  large  cor- 
porations the  purchasing  agent  is  created  a  vice- 
president  and  director  in  recognition  of  his  abilities 
and  owing  to  the  importance  attached  to  the  opera- 
tions of  his  department. 

One  man  is  not  always  wholly  responsible  for  the 
purchases  made  by  any  large  establishment,  but  on 
one  man  the  responsibility  does  rest  to  a  much  larger 
degree  than  on  any  other,  and  that  man  is  the  pur- 
chasing agent.  The  engineer  or  the  expert  specifies 
the  material  required  in  many  cases,  while  in  others 
the  man  who  actually  fabricates  the  article  may  have 
to  be  consulted  in  the  selection  of  the  most  suitable 
grade.  In  the  purchase  of  tools  and  implements,  the 
nature  of  the  work,  the  conditions  under  which  they 
are  to  be  used,  the  material  they  are  to  operate  on, 
and  a  knowledge  of  the  men  who  are  to  use  them, 
must  be  a  predominant  consideration  in  making  a 
purchase,  and  consultation  would  be  necessary  with 
the  man  who  is  to  have  charge  of  \fobir  operation. 
In  buying  goods  for  resale,  other  consraewhjpns  must 
necessarily  be  thoughtfully  and  thoroughly  weighed. 
It  is  axiomatic,  therefore,  that  the  man  in  charge  of 
these  purchases  must  be  tactful  and  diplomatic  in  his 
dealings  with  the  other  men  interested,  and  in  addi- 
tion he  must,  to  obtain  the  best  bargains,  possess 
good  business  training  and  be  a  keen  student  of 
market  values. 


28  PURCHASING 

The  general  principles  which  should  govern  the  ac- 
tions of  the  purchasing  agent  are  the  same,  whatever 
the  nature  and  size  of  business.  To  obtain  the  best 
results,  he  must  be  a  man  who  is  able  to  meet  other 
men  without  arousing  their  animosity,  for  to  be  on  a 
good  footing  with  the  men  with  whom  deals  are  being 
made  is  a  great  advantage.  Men  will  do  for  friend- 
ship what  they  will  not  do  for  financial  gain.  One  of 
the  surest  ways  of  arriving  at  a  good  understanding 
with  the  salesmen  is  to  be  able  to  talk  with  them 
about  their  own  goods,  and  a  man  who  can  do  this 
intelligently  will  be  able  to  make  better  deals. 

While  the  methods  in  vogue,  the  organization,  and 
the  routine  work  of  the  purchasing  agent's  office,  are 
of  great  importance  to  its  successful  operation,  it  is 
essentially  through  the  character  and  make-up  of  the 
man  in  charge  that  the  best  results  are  obtained. 

In  appraising  the  services  of  a  purchasing  agent, 
the  assertion  has  frequently  been  made  that  he  buys 
as  low  as  is  possible,  the  assumption  being  that  this 
qualifies  him  as  a  most  capable  man  for  the  position. 
Outside  of  the  purchasing  agent's  office,  and  in  other 
departments  of  the  business,  the  matter  of  price  is 
too  frequently  looked  upon  as  the  great  or  only  de- 
sideratum. While  admitting  that  this  is  a  considera- 
tion which  must  never  be  lost  sight  of  and  is  of 
supreme  importance,  nevertheless  it  is  imperative 
that  in  conjunction  with  the  question  of  price  other 
questions  must  be  brought  into  the  calculations  when 
a  deal  is  being  made.  The  quality  and  suitability  of 
the  goods  for  the  particular  purpose  for  which  they 
are  needed  must  be  considered.  The  reliability  and 
standing  of  the  seller  must  be  known  or  investigated, 


THE  PURCHASING  AGENT  29 

and  his  ability  to  perform  the  obligations  he  is  enter- 
ing into,  besides  many  other  factors  which  will  be 
referred  to  in  a  later  chapter,  and  which  need  the 
calm  appraisal  of  a  well-balanced  mind. 

Shrewdness  is  essential  to  the  purchasing  agent,  and 
tactfulness  will  help  him  over  many  rough  places  and 
assist  in  the  consummation  of  many  advantageous 
transactions.  Tact  has  been  described  as  doing  the 
right  thing  at  the  right  time,  and  is  probably  more 
essential  in  this  department  of  the  business  than  in 
any  other. 

Technical  knowledge  is  a  great  advantage,  but  can- 
not be  relied  on  to  develop  a  successful  buyer.  The 
vast  amount  of  technical  knowledge  acquired  by  ar- 
chitects, engineers,  physicians,  and  lawyers,  carries 
them  to  certain  fixed  points  or  niches  in  their  profes- 
sions; but  the  men  who  have  achieved  the  greatest 
successes,  or  rather  who  have  acquired  the  greatest 
financial  gain,  are  those  who  haye  had  the  commercial 
instinct  working  in  their  make-up  in  Combination 
with  their  scientific  knowledge. 

Technical  knowledge  without  common-sense  would 
be  of  little  benefit.  In  fact,  common-sense  is  perhaps 
the  highest  requisite  for  a  purchasing  agent  to  possess, 
and  this  qualification  combined  with  energy,  direct- 
ness, honesty,  and  hard  work  will  prove  irresistible. 

Matters    on    which   the    Purchasing   Agent    should    be 
Posted 

To  formulate  anything  like  a  complete  statement  of 
what  a  purchasing  agent  should  know,  would  be  some- 
thing like  compiling  an  encyclopedia.  Some  of  the 
points  on  which  he  should  be  informed  have  been 


30 


PURCHASING 


SUPPLY 


Available  sources  from  which  materials  can  be  obtained, 
whether  production  from  these  sources  shows  a 
tendency  to  increase  ordiminish. 
Probable  quantities  which  will  be  produced  and 
from  which  needs  can  be  supplied. 


Quantities  purchased  in  the  past. 
Estimated  future  needs  with  probable  dates  on 
which  deliveries  will  be  required. 


1  QUALITY 


Detailed  specifications  ofallmateriaJs. 
Results  of  inspection,  copies  of  reports. 
Laboratory  reports  and  tests  of  material. 
Reporkon  material  during  man'fg  process. 
Action  of  material  in  finished  product. 


PRICES 


Prices  paid  in  past. 

Date  prices  were  paid  and  for  what  quantities. 

Quotations  received,  past  and  present. 


FIGURE  No.  3. — A  diagrammatic  synopsis  of  the  various  matters  on  which  the 
purchasing  agent  should  have  information  when  he  is  making  a  purchase. 

already  alluded  to,  but  in  actually  making  a  purchase 
there  are  certain  fundamental  facts  upon  which  he 
should  be  well  posted,  and  which  are  categorically  set 
forth  and  tabulated  in  Figure  3.  His  organization 
and  system  will  keep  this  information  and  these 
data  in  a  state  of  efficient  preparedness  and  ready 
for  reference  at  all  times.  But  it  must  be  remem- 
bered that  there  is  no  finality  to  this  work.  Some- 
body has  said  that  "  Acquired  knowledge  is  only 
elementary  compared  with  the  vast  fund  of  infor- 
mation which  is  yet  undiscovered."  This  applies  with 
force  to  the  information  necessary  in  a  purchasing 
agent's  office. 


THE  PURCHASING  AGENT  31 

Purchases  can  be  divided  roughly  into  four  great 
classes: 

1.  Purchases  for  productive  work. 

2.  Purchases  for  resale.  ~ 

3.  Purchases  of  supplies,  tools,  and  implements. 

4.  Purchases  for  capital  account. 

In  all  of  these  the  purchasing  agent  is  an  important 
determining  factor.  In  the  first  three  he  should  be 
the  final  arbiter  and  have  the  deciding  voice.  He 
should  conduct  and  conclude  all  negotiations  affect- 
ing price,  terms,  and  delivery. 

In  the  matter  of  capital  outlays,  the  purchasing 
agent  should  always  be  consulted.  If  he  is  a  man  who 
has  a  broad  conception  of  his  job,  his  judgment  should 
be  valuable  in  arriving  at  a  decision  as  to  the  advisa- 
bility, the  manner,  and  the  most  opportune  time  to 
make  an  investment,  whether  it  is  in  additional  real 
estate,  a  new  building,  or  better  facilities  for  carry- 
ing on  the  business  of  the  undertaking,  should  it  be 
a  trunk-line  railroad,  manufactory,  or  mercantile  busi- 
ness. In  this  connection  a  knowledge  of  prevailing 
financial  conditions  will  be  of  service,  the  causes  which 
have  brought  those  conditions  about,  and  the  proba- 
ble future  tendency.  This  opens  up  a  very  wide  area 
for  research  work  by  the  purchasing  agent,  and  an  un- 
limited scope  for  the  acquirement  of  knowledge  useful 
in  his  field  of  endeavor. 

If  information  is  on  file  as  indicated  in  Figure  3,  it 
means  that  the  purchasing  agent  is  posted  and  ready 
to  go  into  the  market  to  buy  at  any  time  fully  pre- 
pared. He  knows  exactly 

1.  Where  he  can  obtain  what  he  needs, 

2.  The  quantities  he  needs, 


32  PURCHASING 

3.  The  quality  he  must  have,  and 

4.  The  price  he  should  pay. 

These  are  the  four  main  considerations  to  enable 
him  to  make  a  satisfactory  purchase.  Further  ex- 
planation a  little  more  in  detail  follows. 

1.  Statistics  are  compiled  of  all  those  commodities 
which  affect  the  prosperity  of  the  country  and  are 
deemed  of  national  importance,  such  as  wheat,  cot- 
ton, copper,  etc.,  and  information  as  to  the  visible 
and  invisible  supply  is  kept  on  file  by  those  houses 
trading  in  them.     Most  purchasing  agents  are  inter- 
ested in  some  particular  material  or  commodity,  about 
which  he  should  have  information  as  to  the  probable 
quantities  on  the  market  and  what  will  be  available 
in  future.     It  may  not  be  possible  to  obtain  exact 
data,  still  much  information  that  is  valuable  can  be 
accumulated  and  put  on  record.    This  will  be  essential 
to  him  in  negotiating  for  additional  purchases,  for  a 
surplus  or  shortage  in  the  supply  will  affect  the  price. 

2.  All  facts  connected  with  consumption  in  the  past 
should  be  on  record,  as  on  this  will  be  based  some 
calculations   as   to   future   requirements.     Additional 
information  can  be  obtained  from  other  departments 
of  the  business  as  to  the  estimated  quantities  that  will 
be  needed  and  probable  dates  on  which  deliveries  will 
have  to  be  made.    There  will  also  be  the  maximum  and 
minimum  limits  for  guidance.     These  data   can   be 
ready  for  reference   at  any  time  a  question    should 
arise   as  to  the  advisability  of   making  a  purchase. 
Whenever  a  requisition  is  received  the  exact  quan- 
tities and  delivery  dates  will  be  definitely  known. 

3.  In  some  plants  there  is  an  engineer  of  materials, 
who  inspects  standardized  material  and  also  approves 


THE  PURCHASING  AGENT  33 

substitutes  which  may  be  offered.  He  may  also  have 
control  of  testing  machinery  and  laboratory.  This 
may  be  independent  of  production  or  purchasing  de- 
partments. Individual  conditions  will  determine  the 
advisability  of  this,  but  full  information  should  be  on 
file  in  the  purchasing  agent's  office.  In  other  cases 
one  of  the  many  firms  of  reputable  inspecting  engi- 
neers may  be  employed  to  inspect  and  furnish  this 
information.  Through  these  sources  the  purchasing 
agent  can  be  accurately  and  fully  informed  regarding 
the  physical  and  chemical  properties  of  almost  any- 
thing he  buys  largely.  Such  things  as  coal,  steel, 
cement,  varnish,  paint,  etc.,  are  constantly  tested  by 
large  buyers. 

4.  The  three  considerations  mentioned  will  influence 
the  price  to  be  paid.  The  fourth  is  the  prices  on 
record,  and  in  conjunction  with  the  first  three,  it  will 
form  a  sure  basis  and  guide.  Quotations  received 
should  be  recorded  and  kept  up  to  date.  If  it  is 
necessary  a  price  curve  should  be  kept,  as  this  is  much 
more  illuminative  than  a  tabulated  list  of  figures. 
It  is  still  more  instructive  if  a  price  curve  and  quan- 
tity curve  can  both  be  kept.  A  later  chapter  will 
give  more  details  with  forms  for  keeping  and  record- 
ing these  data  so  as  to  make  them  available  at  any 
time. 

If  a  diagram  is  made  showing  the  steps  by  which 
the  selling  price  of  an  article  is  arrived  at,  it  would 
show  a  progressive  but  unequal  series  of  rises  from 
zero  to  100  per  cent.  This  is  shown  in  Figure  2  in 
the  last  chapter. 

Each  step  represents  a  percentage  of  the  selling 
price,  and  a  purchasing  agent  should  know  enough 


34  PURCHASING 

of  the  cost  accounting  of  the  factory  to  enable  him 
to  trace  the  part  the  purchases  play  in  fixing  the  sell- 
ing price.  It  is  better  to  have  an  intelligent  idea  of 
this  than  to  be  working  in  the  dark.  All  persons  in 
the  organization  do  better  work  if  they  are  interested 
in  the  final  result,  and  this  creates  an  ambition  to 
make  the  best  showing  in  their  share  of  its  activities. 

Another  problem  which  is  constantly  before  the 
purchasing  agent  is  the  question  of  dealing  intelli- 
gently with  the  many  substitutes  which  are  offered 
constantly  in  place  of  materials  in  use.  He  should, 
therefore,  be  sufficiently  well  posted  about  the  busi- 
ness to  know  whether  those  offered  are  worthy  of 
being  tried  out.  No  buyer  can  afford  to  ignore  the 
many  things  which  are  offered  at  apparently  attract- 
ive prices,  and  a  knowledge  of  the  products  manu- 
factured is  necessary  to  enable  him  to  discriminate. 

The    Principal    Functions    Covered    by    the    Purchasing 
Agent's  Activities 

It  has  been  intimated  in  the  earlier  portion  of  this 
chapter  what  the  purchasing  agent  has  to  do  in  gen- 
eral, but  in  the  actual  carrying  out  of  his  executive 
duties  it  is  necessary  to  be  specific.  Figure  4  illus- 
trates the  main  divisions  of  the  work  which  he  must 
supervise. 

In  large  establishments  the  stores  and  traffic  may 
be  entirely  separate  departments,  but  even  so  the  pur- 
chasing agent  has  an  interest  in  their  work.  The 
economic  value  of  a  good  purchase  might  be  lost,  if 
no  adequate  means  existed  for  receiving  and  storing 
the  goods,  or  if  an  excessive  freight  rate  was  paid,  or 
if  delayed  in  transportation. 


THE  PURCHASING  AGENT 


35 


PURCHASING 


Regulate  the  purchasing. 

Buy  at  lowest  prices . 

Obtain  highest  quality  for  prices  paid. 

Order  only  exact  quantities  needed. 


RECEIVING  &> 
INSPECTING 


Articles  bought  are  ones  actually  delivered. 
Quality  purchased  Is  delivered. 
Exact  quantities  ordered  are  delivered. 
Insist  on  specifications  being  complied  with. 


— |       TRAFFIC 


— ]      STORES 


Secure  lowest  freight  rates 
Prevent  delays  in  transit. 
See  that  payments  for  freight  are  correct. 
Get  quick  adjustment  of  claims. 


Keep  investment  in  stores  at  mi  n't  mum. 
Have  deliveries  made  in  accordance  with  needs. 
Keep  goods  secure  from  pilfering  (^deterioration. 
Have  proper  stores  accounts  kept. 


INVOICES 


INFORMATION 


Have  invoices  properly  and  quickly  checked. 
Insure  security  against  over- payments. 
See  that  cash  discounts  are  not  lost  by  delay. 


Obtain  information  regarding  markets. 
Tabu  late  records  of  prices  and  quotations. 
Have  correct  specifications  &  keep  data  of  all  materials. 


\HDMINISTR  ATI  ON\ 


Operate  the  department  economically. 

Render  efficient  service. 

Perfect  his  organ'i2ation  and  system. 


FIGURE  No.  4. — A  diagram  showing  in  tabular  form  the  main  divisions  of  a 
purchasing  agent's  work  and  the  principal  details  of  each  division. 


In  very  small  plants  one  man  may  have  to  cover 
all  of  this  work,  but  they  are  still  distinct  divisions 
of  his  activities.  In  large  undertakings  the  purchasing 


36  PURCHASING 

agent  will  have  the  necessary  assistance  to  carry 
through  the  work  expeditiously  and  efficiently.  By 
the  aid  of  his  assistants  he  must  accomplish  the  vari- 
ous functions  of  his  department,  and  to  do  this  in  the 
right  way  he  must  have  such  men  as  have  suitable 
characteristics  for  the  division  of  the  work  he  allo- 
cates to  them.  He  must  organize  them  into  a  com- 
prehensive whole,,  and  arrange  a  system  that  is  as 
simple  as  possible  for  the  proper  execution  of  the 
work.  If  the  purchases  are  for  a  manufacturing  estab- 
lishment, one  thing  should  be  remembered,  and  that 
is  that  rush  orders  have  no  place  in  a  well-regulated 
factory  and  stores  system.  Such  orders  dislocate  the 
work  of  the  purchasing  office  and  are  not  conducive 
to  good  buying. 

The  purchasing  agent  should  at  convenient  intervals 
visit  his  principal  sources  of  supply.  This  will  be 
found  exceedingly  valuable  as  an  adjunct  to  the  in- 
formation he  has  acquired  through  his  regular  chan- 
nels, and  give  him  a  point  of  view  which  he  could  not 
obtain  in  any  other  way. 

The  tabulated  list  in  Figure  4  will  not  be  discussed 
in  detail  here.  This  whole  book  covers  the  duties  of 
the  purchasing  agent,  but  that  tabulation  puts  them 
into  succinct  form  for  reference  at  a  glance. 

Definition  of  the  Purchasing  Agent's  Authority 

A  clear  definition  should  exist  as  to  the  authority 
of  the  purchasing  agent  to  commit  his  company  to 
extensive  obligations.  The  writer  has  before  him  the 
copy  of  the  regulations  of  a  large  corporation,  and  in 
reference  to  the  purchasing  agent  the  wording  is  as 
follows: 


THE  PURCHASING  AGENT  37 

"The  purchasing  agent  is  charged  with  the  purchase 
of  all  materials  and  supplies.  A  requisition  signed  by 
the  head  of  a  department  shall  be  sufficient  authority 
for  the  supply  of  materials  which  in  the  opinion  of  the 
purchasing  agent  are  necessary  for  the  execution  in  the 
ordinary  course  of  the  duties  with  which  they  are 
charged." 

It  will  be  seen  from  this  that  the  Anus  of  responsi- 
bility is  thrown  on  the  purchasing  agent.  He  there- 
fore has  to  be  a  man  of  strong  character,  and  to  be 
able  to  decide  what  is  necessary.  Cases  have  been 
known  where  the  "heads  of  departments,"  who  are 
sometimes  only  foremen,  have  been  in  the  habit  of 
requisitioning  entirely  unnecessary  and  useless  ma- 
terial, involving  the  concern  in  severe  losses.  It  is 
therefore  essential  that  limitations  should  be  placed 
on  the  men  who  draw  the  requisitions  and  there 
should  be  regulations  governing  the  authority  of  the 
purchasing  agent  in  the  exercise  of  his  duties. 

In  certain  circumstances  and  under  certain  condi- 
tions it  is  possible  that  no  restrictions  or  limitations 
need  be  placed  on  the  purchasing  agent,  other  than 
those  which  the  size  of  the  business  and  its  well-known 
requirements  and  necessities  would  practically  auto- 
matically enforce.  But  in  such  cases  he  must  have  a 
knowledge  of  the  financial  resources  of  the  concern. 

In  the  case  of  a  large  corporation  whose  finances  are 
a  special  study,  and  which  is  a  borrower  more  or  less 
all  the  time,  limitations  must  be  in  force.  These 
limitations  should  be  governed  by  the  nature  of  the 
purchases  and  the  purpose  for  which  they  are  in- 
tended. An  amount  can  be  stipulated  for  general 
monthly  purchases,  and  while  they  remain  below 


38  PURCHASING 

that  figure  the  purchasing  agent  should  have  a  free 
hand. 

If  there  are  exceptionally  large  purchases  to  be 
made,  and  the  material  to  be  bought  is  required  for 
carrying  out  a  contract  into  which  the  corporation 
has  entered,  then  it  should  be  a  matter  for  consulta- 
tion between  or  reference  to  some  other  officials.  The 
treasurer,  sales  manager,  or  production  manager  may 
have  to  be  consulted  or  possibly  all  three. 

When  large  expenditures  are  contemplated  for  ma- 
chinery and  equipment,  it  may  be  necessary  to  get  an 
authorization  from  the  directors.  A  policy  of  this 
nature  brings  together  the  heads  of  departments  in- 
terested and  the  relation  of  the  actual  requirements  of 
the  corporation  to  its  financial  resources  are  brought 
into  harmony.  When  the  decision  has  been  made  to 
go  ahead  with  the  purchases,  the  purchasing  agent 
should  be  left  in  sole  charge  of  the  negotiations. 

The  treasurer  of  a  company  can  only  pay  out  the 
funds  on  receipt  of  a  properly  accredited  voucher,  and 
it  does  not  seem  good  business  policy  to  place  the 
purchasing  agent  in  a  position  where  he  can  obligate 
his  company  to  an  unlimited  amount  on  the  receipt 
of  a  requisition  from  an  irresponsible  foreman  or  de- 
partment head.  Some  scheme  to  regulate  this  should 
be  outlined  in  every  business,  modified  to  conform  to 
its  nature  and  scope. 

Relation  of  the  Purchasing  Agent  to  Other  Department 
Heads 

Mention  was  made  of  the  advisability  of  the  pur- 
chasing agent  visiting  his  sources  of  supply,  which 
enables  him  to  post  himself  on  many  things  which  he 


THE  PURCHASING  AGENT  39 

cannot  get  through  the  ordinary  channels,  and  like- 
wise gives  him  an  opportunity  to  study  at  first  hand 
the  manufacturing  and  business  methods  of  the  people 
he  is  dealing  with. 

Similarly,  it  will  be  of  great  benefit  for  him  to  see 
at  frequent  intervals,  the  heads  of  departments  from 
whom  he  receives  requisitions  and  confer  with  them 
on  their  needs  and  on  any  matters  which  arise 
in  connection  with  the  purchases  he  is  putting  through 
for  them.  A  much  better  understanding  is  arrived 
at  in  this  way  than  through  messages  and  correspond- 
ence, a  mutuality  of  feeling  is  created,  and  a  reciprocal 
tendency  established  to  help  each  other,  which  will 
be  found  of  great  advantage.  This  is  particularly  the 
case  in  overcoming  shop  prejudices,  and  in  those  situa- 
tions where  long  use  has  caused  another  department 
to  grow  accustomed  to  a  certain  kind  of  material, 
when  there  are  others  in  the  market  equally  as  serv- 
iceable and  by  the  use  of  which  savings  can  be 
effected. 

The  diagrams  given  in  this  chapter  (Figures  3  and 
4)  are  intended  to  illustrate  in  a  condensed  form  the 
two  salient  features  of  a  purchasing  agent's  activities. 
First  he  must  know  certain  things  and  secondly  he 
must  do  certain  things.  But  on  both  of  these 
points  he  can  render  himself  and  his  department  more 
valuable  to  the  establishment  by  acquiring  from  the 
heads  of  other  departments  a  more  intimate  acquain- 
tance with  their  requirements  and  collaborating  with 
them  in  their  legitimate  aims.  This  is  something 
beyond  what  appears  on  the  face  of  the  ordinary 
mundane  requisition  and  cannot  be  tabulated  or  put 
into  diagrammatic  form.  This  is  comparable  to  the 


40  PURCHASING 

purchasing  agent  getting  better  acquainted  with  the 
concerns  to  whom  he  gives  orders.  He  is  then  on  the 
best  footing  with  the  people  for  whom  he  is  buying 
and  from  whom  he  is  buying. 

It  is  the  custom  in  some  establishments  for  all  com- 
munications between  departments  to  be  written,  but 
this  can  be  carried  to  an  extreme  where  it  is  waste- 
ful of  time,  effort,  and  stationery.  For  certain  matters 
it  is  necessary,  but  beyond  what  common-sense  dic- 
tates as  essential,  it  should  be  discouraged.  The 
good  judgment  of  the  purchasing  agent  should  deter- 
mine how  far  this  should  be  carried. 


CHAPTER  V 
THE  PURCHASING  DEPARTMENT 

IN   reviewing  or  discussing  the  function  and  activi- 
ties of  a  business  or  one  of  its  departments,  the 
subject  can  be  divided  under  four  headings: 

1.  The  consideration  of  the  work  as  a  whole, 
various  phases  of  it,  and  in  what  manner  it  can  be 
divided  to  obtain  the  most  efficient  results.         

2.  The  organization  of  the  personnel  of  the  depart- 
ment to  take  care  of  the  work  of  each  division. 

3.  The  system  or  method  of  procedure  to  be  fol- 
lowed by  the  employees  in  doing  the  work  allocated 
to  them. 

4.  The  actual  operation,  with  the  necessary  forms 
for  carrying  out  the  work. 

In  this  chapter,  the  first  of  these  will  be  dealt  with, 
each  of  the  others  being  the  subject  of  separate 
chapters. 

The  Department's  Sphere  of  Usefulness 

The  purchasing  of  materials  and  supplies  was 
originally  segregated  because  the  activities  of  the 
undertaking  demanded  the  undivided  attention  of 
or  more  persons  for  this  purpose.  The  organization 
of  establishments  into  departmental  formation  natu- 
rally demanded  that  the  functions  of  buying  should  be 
recognized.  Thus  was  created  the  purchasing  depart- 
ment, and  it  now  has  a  fixed  and  permanent  position 


42  PURCHASING 

in  commercial  life.  It  has  enabled  the  other  depart- 
ments to  devote  their  whole  time  to  their  special 
work,  and  has  proved  its  own  existence  to  be  neces- 
sary by  the  economies  it  has  been  able  to  effect,  and 
by  the  usefulness  of  its  work,  and  the  great  benefits 
derived  from  the  systematizing  of  purchases.  Its 
growth  in  efficiency  will  more  fully  demonstrate  this. 

There  is  no  manufacturing  process  so  simple  that 
it  does  not  require  a  great  variety  of  material  and 
supplies  to  maintain  its  active  existence.  This  is  true 
also  of  most  of  our  public  utility  companies  and  en- 
gineering enterprises;  and  in  order  that  the  best  in- 
terests of  the  undertaking  may  be  served,  the  purchase 
of  everything  needed  by  each  department  should  be 
centralized,  and  never  delegated  to  several  persons 
scattered  through  the  various  sections  of  the  estab- 
lishment. Even  where  a  concern  has  a  number  of 
factories,  or  work  going  on  in  widely  scattered  parts 
of  the  country,  there  should  be  central  control.  In 
such  cases  it  may  be  advisable  to  do  part  of  the  buy- 
ing locally,  but  there  should  be  a  guiding  and  control- 
ling hand,  to  which  the  local  buying  bears  the  relation 
of  fingers. 

The  designation  of  "  every  thing"  is  used  in  exactly- 
the  sense  the  word  implies,  and  covers  raw  material, 
machine  tools,  equipment,  and  office  supplies.  This 
policy  of  centralizing  the  buying  is  put  into  effect 
through  the  purchasing  department,  and  it  should  be 
the  court  of  last  resort.  If  manufacturers  and  sup- 
pliers are  allowed  to  solicit  business  from  the  heads  of 
other  departments,  coming  to  the  purchasing  depart- 
ment for  a  confirming  order,  it  reduces  its  usefulness 
and  standing.  Salesmen  should  not  be  allowed  to  go 


THE  PURCHASING  DEPARTMENT  43 

over  the  head  of  the  purchasing  agent.  He  is  then  a 
known  quantity  of  power  and  any  other  policy  would 
weaken  his  position  in  negotiating  a  deal. 

The  demands  on  the  purchasing  department  grow 
naturally  from  the  needs  of  the  business,  and  cannot 
therefore  originate  with  the  department  itself.  For 
this  reason  it  is  essential  that  the  work  be  efficiently 
and  expeditiously  carried  through,  for  on  this  depends 
the  measure  of  usefulness  it  is  to  the  other  depart- 
ments and  to  the  whole  undertaking.  There  are 
many  ways  in  which  this  can  be  demonstrated,  and 
standardization  will  be  given  as  an  illustration. 

Standardization  of  materials  is  generally  recognized 
as  imperative,  and  strenuous  efforts  are  made  through- 
out all  production  departments  to  put  this  policy  into 
effect;  but  quite  often  in  large  undertakings  supplies 
and  equipment  are  of  such  a  variety  as  to  bewilder 
one  accustomed  to  uniformity.  Such  things  as  sta- 
tionery and  office  furniture  seem  peculiarly  susceptible 
to  the  vagaries  and  personal  predilections  of  the  heads 
of  departments.  There  will  be,  for  instance,  three 
makes  of  riling  cabinets  used  when  one  would  answer 
for  all  departments.  Many  cases  could  be  cited  in 
all  kinds  of  supplies.  It  is  particularly  noticeable  in 
some  of  our  municipalities.  The  standardization  could 
be  effected  through  the  purchasing  department  more 
readily  than  any  other  source,  as  it  is  the  clearing 
house  for  all  requisitions.  Economical  considerations 
and  the  question  of  convenience  should  compel  atten- 
tion to  this.  Certainly  better  prices  can  be  obtained 
if  standard  articles  are  bought  which  can  be  used  in 
any  department,  and  the  convenience  derived  from 
their  being  interchangeable  cannot  be  overlooked. 


44  PURCHASING 

Size  of  the  Department 

This  department  of  a  business  may  be  large  or 
small.  It  should  be  proportioned  in  size  and  impor- 
tance to  the  actual  reqi^irenients  and  necessities  of  the 
undertaking.  In  a  large  corporation  devoted  to  trans- 
portation, public  utilities,  or  manufacturing,  this  will 
mean  a  purchasing  agent  with  a  staff  of  assistants 
necessary  to  such  an  organization. 

In  a  strictly  merchandise  business,  there  will 'be 
buyers  for  the  numerous  departments  who  act  indi- 
vidually under  certain  restrictions  and  sometimes 
under  central  control. 

Some  of  the  large  railroad  combinations  which 
operate  lines  in  various  sections  of  the  country  have 
a  system  of  co-ordinating  their  purchases  through  a 
purchasing  agent  who  has  his  office  in  close  proximity 
to  the  president  and  directors,  and  possibly  not  any- 
where near  the  railroad  for  which  he  is  buying. 

Manufacturing  concerns  with  factories  in  widely 
separated  parts  of  the  country  have  found  it  to  their 
advantage  to  have  a  central  control  for  purchases. 
This  is  sometimes  done  through  a  supervisor  of  pur- 
chases, under  him  being  a  purchasing  agent  for  each 
factory.  Good  results  have  been  obtained  through 
such  a  scheme  in  the  matter  of  price,  uniformity  of 
raw  material,  and  better  regulation  and  control  of 
purchases,  consequently  making  things  easier  and 
smoother  for  the  financial  department. 

The  size  of  the  department  can  be  graduated  to 
meet  the  needs  of  every  establishment  until  in  small 
concerns  there  may  be  only  part  of  the  services  of 
one  man  required;  nevertheless,  it  is  strictly  a  de- 


THE  PURCHASING  DEPARTMENT  45 

partment  of  the  business,  and  the  fundamental  prin- 
ciples governing  its  work  remain  the  same  irrespective 
of  its  magnitude. 

The  Employees  of  the  Department 

The  staff  necessary  will  of  course  be  governed  by 
the  volume  and  importance  of  the  work  passing 
through  the  office.  There  must  be  sufficient  number 
of  employees  to  carry  through  promptly  and  efficiently 
the  daily  routine  operations.  A  department  has  failed 
because  through  outside  pressure  it  has  been  forced 
to  reduce  its  staff  to  a  point  where  the  work  could 
not  be  carried  through  in  its  normal  course,  or  it  has 
been  compelled  to  employ  inferior  help  with  a  cor- 
responding reduction  in  efficiency.  This  is  not  econ- 
omy, it  is  parsimony.  If  the  work  of  the  department 
is  worth  doing  at  all,  it  must  be  well  done  or  it  has 
no  reason  for  existing. 

A  department  may  fail  in  its  mission  from  other 
causes.  It  may  become  overloaded,  top-heavy,  and 
encumbered  with  too  many  employees,  or  an  un- 
workable system  of  operation.  Either  of  these  con- 
ditions will  mean  a  reduction  in  efficiency,  and  if  its 
continuance  as  a  useful  factor  in  the  business  is  de- 
sired, reorganization  will  be  necessary. 

Greatly  increased  efficiency  can  be  obtained  by 
effective  team  work,  and  among  the  members  of  the 
department  there  should  be  engendered  a  spirit  of 
good  feeling  and  co-operation,  which  should  be  en- 
couraged to  spread  to  all  the  points  where  contact  is 
made  with  other  divisions  of  the  enterprise.  This  is 
of  inestimable  benefit  in  overcoming  friction. 


46  PURCHASING 

Relations  with  Other  Departments 

A  staff  which  is  entirely  unsympathetic  with  the 
particular  needs  of  the  users  of  the  material  will  fail 
to  grasp  what  is  one  of  the  most  essential  things 
necessary  for  this  department.  They  will  be  dealing 
with  papers  and  accounts  instead  of  with  men  and 
things. 

It  is  up  to  the  head  of  each  department  to  bring 
about  and  keep  in  existence  this  harmonious  relation, 
and  tact,  discretion,  and  diplomacy  should  be  exer- 
cised by  all  the  staff,  for  this  department  is  constantly 
in  contact  with  others.  Every  purchasing  agent  has 
had  the  experience  of  being  told  what  is  thought  of 
his  department  when  any  delay  has  occurred  in  ob- 
taining material.  It  is  assumed  at  once  that  the 
purchasing  department  is  entirely  out  of  sympathy 
with  the  legitimate  aims  of  other  departments. 

Every  department  of  a  business  is  a  member  of  one 
family  and  although  each  member  must  stand  on  its 
own  feet  and  work  out  its  own  salvation,  it  should 
nevertheless  be  willing  and  ready  to  assist  and  make 
as  smooth  as  possible  the  workings  of  every  other 
department.  This  can  be  done  without  much  over- 
lapping, which  should  be  avoided  wherever  possible. 
The  duties  of  each  can  be  clearly  defined  and  the  work 
allocated  so  that  no  friction  will  exist,  and  happy 
is  the  concern  which  can  carry  on  its  multitudinous 
activities  in  such  a  manner,  for  it  is  no  exaggeration 
to  say  that  vast  sums  are  lost  where  these  conditions 
do  not  prevail.  There  should  be  a  meeting  point  be- 
tween any  two  departments  where  no  clashing,  fric- 
tion, or  jealousy  exist,  but  where  the  necessary 


THE  PURCHASING  DEPARTMENT  47 

intercourse  and  junction  between  the  two  flows  as 
smoothly  as  the  traditional  village  stream. 

It  is  a  question  mainly  of  being  able  to  meet  and 
handle  the  peculiarities  and  prejudices  of  the  human 
element.  Any  concern  comprising  many  departments 
may  have  to  meet  this  in  an  acute  form,  but  with  the 
right  methods  it  can  be  met  with  the  least  amount  of 
inconvenience  and  hindrance  to  the  work  of  any 
department  with  an  appreciable  resultant  gain. 

The  attitude  of  the  other  departments  of  the  under- 
taking will  be  a  reflection  of  the  purchasing  depart- 
ment's service  to  them,  and  the  criterion  by  which  it 
will  be  measured.  Mutual  confidence  and  co-opera- 
tion will  be  attained  by  a  policy  of  tact  and  willingness 
to  help.  The  lines  of  demarcation  between  depart- 
ments are  not  boundary  lines  between  two  countries, 
where  many  formalities  have  to  be  gone  through 
before  one  can  cross. 

Subdividing  the  Department 

Figure  5  illustrates  in  a  distinctive  manner  the 
method  of  dividing  the  work  of  a  purchasing  depart- 
ment. There  are  really  three  main  divisions  of  the 
work  connected  with  purchasing,  these  being: 

1.   INFORMATION,  which  includes: 

a.  Obtaining    information    as    to    sources    of 

supply. 

b.  Recording  data  of  past  purchases. 

c.  Recording  prices  and  quotations. 

d.  Keeping  results  of  inspections  and  tests. 

e.  Maximum   and   minimum   quantities    and 

future  needs. 


48 


PURCHASING 


# 


I 


*\ 
o 

\ 


m 

o^  _ 


^ 


ff 


-0 
•P 


ft 


ADMIMISTRATIOM 


or 
Q 


FIGURE  No.  5. — Chart  of  the  functional  organization  of  a  purchasing 
department. 


2.  PURCHASES,  which  is  subdivided  into: 

a.  Work  connected  with  requisition. 

6.  Obtaining  quotations. 

c.   Placing  orders  and  following  up. 

3.  INVOICES,  which  is  subdivided  into: 

a.  Recording  and  checking  with  order. 

6.  Checking  prices,  classifying,  etc. 

c.   Approving  and  passing  to  accountants. 


THE  PURCHASING  DEPARTMENT  49 

There  is  other  work  which  is  in  some  cases  included 
in  purchasing  department,  and  in  others  is  entirely 
separate.  This  work  is  connected  with: 

4.  TRAFFIC,  which  is  subdivided  into: 

a.  Seeing  that  shipments  are  properly  classi- 

fied; 

b.  That  correct  freight  rates  are  obtained; 

c.  That  no  delays  occur  in  transit. 

d.  Getting  quick  adjustment  of  claims. 

5.  INSPECTION,  which  includes: 

a.  Inspection  of  material  before  or  on  arrival. 

b.  Making  physical  and  chemical  tests. 

c.  Reports  on  material   in   shop   and   in  the 

finished  products. 

6.  STORES,  which  is  subdivided  into: 

a.  Receiving  material  and  supplies. 

b.  Storing  in  secure  and  proper  places. 

c.  Delivering  for  consumption  as  needed. 

d.  Keeping  proper  and  reliable  accounts. 
The  first  three  sections,  which  are  connected  with 

purchasing,  are  dealt  with  fully  throughout  the  book; 
but  the  other  divisions,  which  are  not  essentially  a 
part  of  the  function  of  buying,  call  for  some  remarks 
on  the  principal  features  of  their  activities. 

Traffic  Division 

In  industrial  economics  the  study  of  problems  con- 
nected with  transportation  and  stores  keeping  are  ex- 
tremely interesting.  The  efficient  operation  and  con- 
duct of  the  work  coming  under  these  designations  is 
vital  to  the  well-being  of  any  concern.  They  are 
closely  related  to  the  work  of  the  purchasing  depart- 
ment, but  owing  to  the  magnitude  of  the  undertaking, 


50  PURCHASING 

or  some  other  good  reason,  the  work  connected  with 
traffic  and  store  keeping  does  not  come  under  the  pur- 
chasing agent's  control,  but  these  are  organized  as  sepa- 
rate departments.  This  is  a  matter  for  solution  as 
found  best  in  each  individual  case.  If  the  regulations 
governing  the  purchasing  department  require  it  to 
buy  and  furnish  materials  and  supplies,  then  it  is 
certainly  part  of  its  duties  not  only  to  buy,  but  to 
deliver  the  goods  to  the  department  needing  them.  This 
means  arranging  and  controlling  transportation,  re- 
ceiving, properly  storing,  and  finally  delivering  them 
to  departments  for  consumption  when  they  are  ready 
for  them. 

The  main  objects  which  are  achieved  by  the  proper 
and  efficient  control  of  the  traffic  problem  are: 

Goods  are  received  promptly  and  correctly. 

Shipments  are  made  properly. 

Teaming  is  arranged  on  most  economic  basis. 

Freight  charges  are  lowest  obtainable. 

Claims  are  quickly  adjusted. 

It  is  not  the  province  of  this  book  to  go  deeply 
into  this  interesting  subject.  The  brief  description 
given  will  convey  some  impression  of  its  economical 
importance  in  all  transactions  involving  the  move- 
ment of  merchandise,  material,  and  equipment. 

Inspecting,  Receiving,  and  Storing 

The  proper  inspection,  receipt,  and  storing  of  mate- 
rials and  supplies  are  of  great  importance.  The  prin- 
cipal ady^aatoges  secured  by  the  efficient  control  of 
these  functions  are: 

1.  The  receipt  of  goods  as  ordered,  both  in  respect 
to  quantity,  quality,  weight,  and  size. 


THE  PI/RCHASING  DEPARTMENT  51 

t 

2.   The  rejection  of  excess  quantities  or  those  incor- 
rect in  weight  or  size,  or  inferior  in  quality. 
"     3.   The  absolute  knowledge  that,  when  invoice  is 
checked  with  material  receipt,  you  are  getting  exactly 
what  you  are  paying  for. 

4.  The  proper  care  for  material  until  such  times  as 
it   is   needed    for    consumption,  with    the    minimum 
amount  of  deterioration. 

5.  The  maintenance  of  a  complete  and  perpetual 
inventory  during  the  period  that  goods  are  at  rest  in 
the  stores. 

6.  The  delivery  for  use  or  consumption  exactly  as 
and  when  required,  with  a  complete  record  of  same. 
Cost  accounting  would  be  practically  impossible  with- 
out this. 

The  perpetual  inventory  serves  to  show  when  stocks 
are  reaching,  and  have  reached,  the  maximum  and 
minimum  permissible.  The  fixing  of  this  limit  in  both 
directions  is  of  the  highest  importance.  It  enables 
sufficient  material  to  be  carried  in  stock  for  the  needs 
of  the  business,  and  is  a  preventive  against  overstock- 
ing. There  is  a  monetary  value  in  being  able  to  furnish 
promptly  to  the  production  department  such  material 
as  they  need  at  the  precise  moment  it  is  required. 
Active  stocks  can  be  maintained  at  the  minimum 
consistent  with  safety.  Investment  is  kept  at  the 
lowest  possible  point.  The  space  occupied  is  re- 
duced to  the  smallest  dimensions.  All  these  are 
gains,  whereas  if  stocks  carried  are  excessive  for 
needs  of  business,  or  if  track  is  not  kept  of  the 
activity  of  certain  stocks  and  they  accumulate 
beyond  requirements,  or  if  "dead"  stock  is  carried, 
the  following  losses  are  incurred:  depreciation,  insur- 


52  PURCHASING 

ance,  obsolescence  of  money  invested,  value  of  space 
occupied. 

The  perpetual  stock  record  is  theoretically  a  cor- 
rect basis  for  periodical  inventories,  but  the  human 
factor  must  be  taken  into  account,  and  some  dis- 
crepancies are  always  shown  when  actual  count  is 
made.  The  nature  of  the  stock  has  something  to  do 
with  this.  It  is  remarkable,  however,  how  closely  these 
check  up  in  well-kept  stores.  In  theory  it  should 
balance  as  accurately  as  the  cashbook.  When  check- 
ing the  perpetual  inventory  with  stock  in  stores  it  is 
not  necessary  to  make  a  count  of  all  items  at  one 
time,  but  it  can  be  done  in  sections  while  routine 
work  is  going  on  until  the  whole  is  covered  with  fre- 
quency and  regularity. 


CHAPTER  VI 

ORGANIZATION  OF  DEPARTMENT 

Organization  of  Personnel 

THE  purpose  of  this  chapter  is  to  endeavor  to 
outline  the  organization  of  the  staff  of  the  de- 
partment. It  is  not  possible  to  present  to  the  reader 
an  office  completely  organized  to  fit  any  condition, 
all  the  employees  at  their  respective  desks  with  the 
necessary  equipment  as  a  potent  working  force. 

Some  purchasing  departments  have  been  in  existence 
so  long  that  their  evolution  and  growth  are  shrouded 
in  obscurity.  The  origin,  however,  in  all  cases  has 
been  the  same:  the  necessity  for  a  systematic  method 
of  making  and  controlling  purchases.  From  this  need 
the  idea  sprang  and  was  followed  by  the  apportioning 
of  part  or  the  whole  of  one  man's  time  or  the  alloca- 
tion of  several  men  to  the  work. 

This  was  the  nucleus  from  which  all  purchasing 
departments  started,  and  a  similar  scheme  must  be 
followed  by  any  concern  desiring  to  bring  its  policies 
into  recognized  lines  of  highest  efficiency. 

The  purchasing  department  is  an  economic  develop- 
ment itself,  and  therefore  its  internal  management 
should  exemplify  this  policy.  This  does  not  mean  that 
cheap  men  should  be  selected  for  the  work,  as  such 
a  policy  would  be  like  buying  the  lowest  priced  article 
which  might  prove  the  most  expensive  from  a  utili- 
tarian point  of  view. 


54  PURCHASING 

The  main  object  to  be  achieved  is  to  get  the  work 
done  ably,  correctly,  and  expeditiously  at  the  least 
cost.  Cheap  men  and  mistakes  are  more  expensive 
than  high-priced  men  and  efficiency. 

The  organization  should  be  complete,  but  at  the 
same  time  should  consist  of  the  smallest  possible 
number  of  employees.  Work  can  always  be  carried 
out  more  effectively  when  there  is  sufficient  to  keep 
each  person  diligently  engaged  rather  than  when  there 
is  a  superfluity  of  employees  without  proper  .duties  to 
assign  to  each. 

In  any  active  business  the  purchasing  department 
fulfills  one  of  the  most  vital  functions  of  the  con- 
cern, and  its  activities  cannot  be  stopped  or  delayed. 
In  considering,  therefore,  the  number  of  employees 
necessary  for  the  department,  this  must  be  borne  in 
mind  and  provision  made  for  the  work  to  continue 
during  the  temporary  absence  of  any  employee. 

To  provide  for  this  contingency  means  that  each 
person  in  the  department  must  have  an  understudy, 
or  the  work  allotted  to  him  must  be  of  such  a.  nature 
that  it  can  be  portioned  out  among  the  others  for 
short  periods.  There  should  be  no  indispensable  man 
in  the  organization. 

This  policy  has  a  beneficial  effect  in  making  the 
force  more  adaptable,  and  has  a  tendency  to  make  a 
man  take  more  interest  and  do  his  work  more  intelli- 
gently, because  it  gives  him  a  broader  view  of  the 
work  as  a  whole.  He  sees  more  clearly  where  his 
particular  duties  fit  in,  and  he  may  be  enabled  to  see 
improvements  which  can  be  effected. 

This  also  brings  more  intelligent  co-operation  be- 
tween the  employees  which  has  a  direct  influence  in 


ORGANIZATION  OF  DEPARTMENT  55 

securing  more  completely  the  objects  to  be  attained, 
and  is  of  inestimable  benefit  to  the  conduct  of  the 
work.  It  is  also  conducive  to  more  enthusiasm, 
and  enthusiasm  breeds  loyalty  and  contentment, 
which  beget  efficiency. 

One  cannot  take  the  plan  of  the  organization  of 
any  going  concern  and  implant  it  in  another  estab- 
lishment as  a  solution  of  the  latter's  problem,  and  as 
embracing  all  the  elements  necessary  for  the  perform- 
ance of  its  work.  Circumstances  and  conditions 
vary  to  such  a  degree  that  this  is  not  possible  even 
where  the  nature  and  volume  of  the  business  are 
practically  identical. 

It  is  therefore  intended  that  the  organization  as 
outlined  here  should  be  looked  upon  more  for  helpful 
suggestions.  It  is  one  of  the  constructive  duties  of 
the  purchasing  agent  to  plan  the  details  of  his  depart- 
ment and  anything  he  finds  useful  in  this  suppositi- 
tious organization  will  have  to  be  adapted  to  his  own 
surroundings. 

Theorizing  does  not  accomplish  anything,  but  it  is 
generally1  the  product  of  experience,  and  put  into  prac- 
tice produces  experience. 

In  studying  employees,  the  men  selected  for  the 
various  phases  of  the  work  should  be  chosen  with  a 
view  to  their  natural  aptitude  for  the  work  to  which 
they  are  assigned. 

Linking  up  the  Employees 

Where  the  organization  is  large  enough  to  warrant 
its  being  subdivided  for  the  better  performance  of 
its  duties,  great  care  must  be  taken  to  form  these 
subdivisions  in  such  a  manner  that  intercommunica- 


56  PURCHASING 

tion  is  easy  and  made  without  perceptible  retardation 
of  the  work. 

Another  matter  to  be  considered  is  the  linking  up  of 
the  individual  work  of  each  member  of  the  organiza- 
tion to  form  a  composite  whole.  An  endeavor  has 
been  made  in  Figure  6  to  demonstrate  this.  It  is 
only  intended  here  to  briefly  outline  the  duties  of  the 
members  of  this  tentative  organization  for  the  better 
understanding  of  the  chart.  Their  complete  activities 
will  be  described  when  each  function  is  dealt  with  in 
detail. 

•/     Information  Clerk 

A  large  proportion  of  the  work  of  the  department 
can  be  done  only  by  frequent  reference  to  the  infor- 
mation and  data  on  file.  It  will  be  necessary  for  the 
person  in  charge  of  this  to  keep  his  records  up  to  date. 
He  must  have  all  requisite  facilities  for  obtaining  and 
retaining  the  data  as  to  prices,  sources  of  supply,  past 
purchases,  catalogues,  inspection  reports,  etc.  He 
must,  therefore,  be  methodical  and  systematic,  and  be 
ready  to  furnish  the  information  promptly  and  cor- 
rectly or  have  it  in  such  shape  that  it  can  be  easily 
referred  to. 

;     Requisition  Clerk 

Requisitions  frequently  come  into  the  office  with 
incomplete  information  on  them,  and  it  is  the  duty 
of  the  man  handling  them  to  see  that  they  are  in 
proper  order  and  that  the  material  is  correctly  specified. 
He  will  have  to  refer  to  the  information  files  con- 
stantly and  must  be  in  close  touch  with  the  man 
having  charge  of  these. 


ORGANIZATION   OF  DEPARTMENT 


57 


\lnvoices\  vnfortnat 


v/ 


wish 


[Recordir 
Clerk 


ICheckinc 
Clerk 


Invoice^ 
Price 
Clerk 


Information  ( 
Clerk 


Clerk 


Price 
Clerk 


Order 
Clerk 


Final 
{Checking] 
{  Clerk  ^} 


Traffic 
Clerk 


Clerk 


In 


Plant  ynspecfor\  Outside 


FIGURE  No.  6. — Organization  of  the  personnel  of  a  purchasing  department. 

Price  Clerk 

The  price  clerk  will  specify  the  price  from  agree- 
ments or  contracts  which  are  already  in  force,  or  obtain 


58  PURCHASING 

quotations,  make  comparisons  of  the  prices,  and  submit 
them  to  purchasing  agent. 

v     Order  Clerk 

The  duties  of  the  man  in  charge  of  orders  will  be  to 
see  that  they  are  properly  written  up  from  specifica- 
tions and  with  correct  prices,  check  them  before  the 
purchasing  agent  signs  them,  and  follow  up  after  they 
are  placed.  Copies  will  have  to  be  sent  to  parties 
interested. 

Inspector 

The  inspector  will  receive  copy  of  order  and  inspect 
material  either  in  the  plant  or  at  point  of  shipment, 
reporting  to  purchasing  agent  and  possibly  to  store- 
keeper. He  may  also  have  to  furnish  reports  on  the 
action  of  materials  during  the  process  of  fabrication. 

Invoice  Clerks 

There  will  be  as  many  men  as  necessary  on  this 
work,  recording  invoices,  checking  with  order,  check- 
ing prices,  classifying,  having  traffic  man  approve 
freight  charges,  and  finally  passing  invoices  to  account- 
ants. Part  of  this  work  is  sometimes  done  in  account- 
ant's office. 

Traffic  Clerk 

There  are  many  industries  whose  activities  are  not 
of  sufficient  magnitude  to  warrant  the  maintenance 
of  a  separate  traffic  department.  Again,  some  con- 
cerns whose  operations  are  very  large  can,  from  the 
nature  of  their  work,  combine  this  work  with  the 
purchasing  organization.  This  is  the  case  where  the 


ORGANIZATION  OF  DEPARTMENT  59 

orders  placed  are  mainly  for  construction  work  and 
traffic  matters  all  pertain  to  these  purchases,  there  being 
no  shipments  from  factory  for  sales  department.  A 
man  should  be  selected  for  this  work  who  is  conver- 
sant with  its  character  and  the  problems  involved  in  it. 

Storekeeper 

A  reference  to  Figure  6  will  show  in  what  manner 
the  storekeeper  is  linked  up  with  the  various  activities 
of  purchasing.  He  is  more  directly  interested  in  the 
actual  movement  of  the  material  itself  and  its  conser- 
vation. The  purchasing  agent  has  indirect  connection 
with  the  storekeeper  through  the  order  clerk,  but  the 
storekeeper  on  his  part  must  have  direct  access  to 
the  purchasing  agent,  and  an  effort  has  been  made  in 
the  diagram  to  show  how  this  is  accomplished. 

When  the  activities  of  the  purchasing  department 
are  restricted  to  buying,  the  stores  organization  would 
be  formed  independently,  but  it  is  sometimes  found 
advisable  to  combine  the  keeping  of  the  stores  with 
the  purchasing,  especially  in  the  smaller  manufacturing 
concerns.  A  short  summary  of  the  organization  to 
take  care  of  this  work  is  given  here.  As  in  the  traffic 
division,  the  volume  of  the  work  to  be  accomplished 
will  determine  the  number  of  employees  requisite. 
This  will  vary  greatly  with  different  concerns,  but 
arrangements  must  be  made  to  cover  the  following 
points  irrespective  of  the  number  of  employees  or- 
ganized to  do  it: 

Receipt  of  all  material  and  supplies. 

Checking  to  see  that  they  correspond  with  orders. 

Counting,  weighing,,  and  measuring. 

Placing   in   proper   storage   compartments   without 


60  PURCHASING 

undue  delay,  or  in  some  cases  delivering  directly  to 
department  for  consumption. 

Entering  on  receiving  records. 

Making  entry  on  stores  record  or  perpetual  inventory. 

Delivering  from  stores  to  various  departments  all 
material  and  supplies  required  by  them. 

Making  entry  on  perpetual  inventory. 

Keeping  stores  tickler  in  force  and  advising  pur- 
chasing agent. 

Keeping  record  for  cost  accounting. 

Receiving  scrap  into  stores,  counting,  weighing,  and 
measuring,  and  advising  purchasing  agent. 

These  are  the  principal  points  to  be  covered  and  a 
good  man  should  be  placed  in  charge  with  the  neces- 
sary clerical  help  for  keeping  up  the  records.  In 
handling  the  material,  arrangements  must  be  made  to 
give  all  the  help  required.  The  men  engaged  in  the 
physical  operation  will  be  under  orders  of  the  store- 
keeper. In  small  factories  it  is  not  always  possible 
for  these  men  to  be  a  fixed  number  and  temporary 
assistance  can  be  drawn  from  other  departments  to 
assist  with  heavy  material. 

When  the  cashier  receives  a  dollar  he  is  held  ac- 
countable for  it,  and  has  to  keep  a  proper  record  of 
its  disposition.  A  dollar's  worth  of  brass  tubing  is 
just  as  much  an  asset  as  a  dollar  in  cash.  The  hon- 
esty, integrity,  and  reliability  of  the  storekeeper  must 
be  on  a  par  with  the  cashier.  In  fact,  the  storekeeper 
must  be  more  watchful  and  careful  in  guarding  against 
petty  thefts.  The  assets  under  his  control  cannot  be 
placed  under  lock  and  key  and  sometimes  many  per- 
sons are  handling  them  in  receiving  into  and  delivering 
from  the  stores. 


ORGANIZATION  OF  DEPARTMENT  61 

A  further  reference  to  Figure  6  will  illustrate  that 
the  organization  of  the  personnel  is  dependent  upon 
three  main  sources  for  the  arrangement  given  of  their 
work.  These  sources  are  shown  at  the  head  of  the 
chart.  The  functions  of  each  member  of  the  depart- 
ment originate  from  one  of  these  and  the  performance 
of  the  work  of  each  follows  a  well  defined  course. 
There  are  however  many  minor  activities  which  are 
common  to  almost  any  business  office  but  which  are 
too  well  known  to  need  detailing  here. 


CHAPTER  VII 

SYSTEM  OF  PROCEDURE 

General  Outline 

WHATEVER  the  size  or  scope  of  the  department, 
it  is  absolutely  essential  that  there  should  be 
a  proper  system  on  the  lines  of  which  the  work  can 
be  carried  along,  but  system  does  not  perform  an 
operating  movement.  It  is  simply  the  well-kept  track 
on  which  the  energy  and  efficiency  of  the  organization 
put  through  the  work  to  be  accomplished  until  the 
terminus  is  reached.  This  track  must  be  kept  as 
straight  and  level  as  the  nature  of  the  route  to  be 
traversed  will  permit,  with  the  least  possible  number 
of  curves  and  grades,  and  where  these  cannot  be  dis- 
pensed with,  they  should  be  gradual  and  easy. 

In  pamphlets  and  books  on  various  systems  for 
office,  store,  and  factory  management,  statements  are 
frequently  made  regarding  what  a  good  system  will  do. 
)As  a  matter  of  fact,  a  system  of  itself  will  do  nothing. 
It  may  be  inert  and  useless  unless  operated.  A  good 
system  can  be  compared  to  a  trunk-line  railroad  with 
useful  and  profitable  branches.  Care  must  be  taken 
that  no  unprofitable  extensions  and  branches  are 
added,  or  they  will  be  a  burden  and  expense  and 
retard  and  clog  the  work  of  the  main  line  with  the 
prospect  of  rendering  the  whole  a  failure. 
^  Forms  and  office  implements  do  not  make  a  system, 
they  are  the  vehicles  or  implements  necessary  for 


SYSTEM  OF  PROCEDURE  63 

operation  and  will  be  described  in  subsequent  chap- 
ters. They  should  be  as  few  as  possible,  for  then  the 
work  will  be  expedited.  Too  many  forms  are  cum- 
bersome and  retard  the  work. 

The  ami  should  be  to  plan  or  outline  a  route -for 
the  work  of  the  office,  which  shall  have  a  definite 
object  in  view  and  be  coherent,  logical,  and  thorough. 
It  should  expend  the  least  amount  of  the  energy  of  the 
organization.  Simplicity  should  be  kept  in  view, 
and  all  forms  used  should  be  devoid  of  any  features 
likely  to  lead  to  complications.  Have  the  system 
cover  everything  essential  to  gather  into  concise 
form  the  necessary  data,  and  in  such  a  way  that  they 
are  readily  understood  and  easily  accessible.  When 
this  object  is  attained  stop,  but  do  not  stop  until  it  is 
attained. 

If  a  condition  of  over-systematizing  is  allowed  to 
come  into  existence,  it  is  a  menace  and  will  lead  to 
confusion.  An  abnormal  desire  by  the  head  of  a  de- 
partment to  secure  and  maintain  records  covering  a 
mass  of  detail  not  pertinent  or  essential  to  the  depart- 
ment, will  eventually  crush  it  by  its  own  weight; 
while  an  incomplete  system  will  render  the  work  and 
operation  of  the  department  laborious  and  inefficient. 
A  good  system  will  help  towards  order,  regularity,  and 
expedition. 

The  justification  of  a  system  is  its  effectiveness  in 
covering  with  accuracy  and  dispatch  all  the  points 
comprehended  in  the  work  of  the  office  with  the  ab- 
solute certainty  of  increased  economy. 

It  is  necessary  to  design  and  lay  out  one's  own 
system.  Although  valuable  suggestions  are  obtained 
by  studying  others,  they  can  rarely  be  adopted  with- 


64  PURCHASING 

out  alterations  and  changes  to  meet  the  conditions 
of  one's  own  case.  A  good  system  is  really  dictated 
by  common-sense.  It  has  to  be  administered  by  the 
organized  staff  in  the  office  with  all  the  human  frail- 
ties, and  the  better  co-ordination  it  can  bring  to  their 
efforts,  the  greater  its  potentialities  for  success. 

There  are  thousands  of  men  today  at  the  head  of 
large  establishments  who  look  on  system  as  so  much 
red  tape,  and  the  observance  of  any  logical  routine 
in  handling  their  business  is  repugnant  to  them.  Cer- 
tainly they  have  their  methods  of  doing  work,  but 
they  are  imbued  with  the  idea  that  there  is  some 
inherent  complexity  in  a  correct  system.  The  writer 
knew  of  a  manufacturer,  whose  annual  business 
amounted  to  several  hundred  thousand  dollars,  with 
the  following  routine  for  making  purchases:  A  fore- 
man would  need  some  material  and  would  make  a 
memorandum  of  it  on  any  piece  of  paper  which  came 
first  to  his  hand.  This  "  scrap  of  paper "  was  sent  to 
the  office  where  the  bookkeeper  would  write  an  order. 
Price  was  never  questioned,  quantities  in  stock  were 
unknown,  and  invoices  checked  from  memory.  If 
material  was  urgently  needed,  the  bookkeeper  would 
telephone  for  it,  not  sending  a  confirming  order.  If 
he  happened  to  be  out  of  the  office,  the  foreman 
himself  telephoned. 

Some  men  do  business  with  methods  such  as  these 
and  make  money,  but  it  is  only  when  their  profits 
are  abnormally  large,  and  when  brought  into  the 
strong  light  of  competition  with  businesses  which  have 
an  efficient  purchasing  system  and  accurate  methods 
of  cost  keeping,  they  would  be  pushed  to  one  side  and 
probably  not  know  the  reason  why. 


SYSTEM  OF  PROCEDURE  65 

A  system  is  a  means  by  which  the  purchasing  agent 
can  put  the  work  through  the  office  by  the  shortest 
route,  giving  the  most  efficient  service  at  least  cost. 

System   of   Procedure   for   the    Collection   of   Data   and 
Information 

The  collection  of  information  pertinent  to  the  ac- 
tivities of  the  department  is  an  absolute  necessity  if 
it  is  to  be  kept  thoroughly  posted.  And,  unless  the 
members  of  the  department  want  to  trust  to  their 
memories,  it  is  equally  imperative  that  all  of  this  in- 
formation should  be  assorted,  converted,  reduced,  or 
arranged  so  that  it  can  be  placed  in  convenient  and 
handy  receptacles  ready  for  instant  reference  by  the 
purchasing  agent  or  his  assistants.  This  is  the  stored 
knowledge  of  the  department  and  is  a  potential  factor 
in  its  operation. 

Figure  7  shows  the  route  to  be  followed  in  reaching 
out  and  acquiring  the  various  items  of  information, 
printed  matter,  etc.,  which  are  necessary  to  make  the 
files  valuable  for  reference.  A  full  description  of  this 
work  will  be  found  in  the  chapter  on  Operation  of  the 
Department.  On  receipt  of  the  information  in  the 
office,  or  in  posting  it  from  quotations  and  orders, 
an  orderly  and  logical  arrangement  should  be  followed 
by  simple  processes,  so  that  there  may  be  concentrated 
in  clear  and  concise  form  a  complete  expression  of  the 
data  required. 

Except  the  data  and  information  posted  directly 
from  office  records,  all  the  other  matter  relating  to 
this  phase  of  the  work  can  pass  through  a  regular 
clearing-house  system  and  be  sorted  and  placed  in  its 


66 


PURCHASING 


SYSTEM  OF  PROCEDURE 


67 


proper  receptacles  ready  for  reference  at  any  moment 
by  the  office  staff  or  purchasing  agent. 

Purchasing  Procedure 

The  system  followed  in  making  purchases  is  very 
clearly  illustrated  in  Figure  8.  The  requisitions  com- 
ing into  the  office  constitute  the  authority  to  make  the 
purchases.  They  should  be  seen  first  by  the  head  of 


Com p feted  and 
placed  in  "Dead 
r       File" 


Recording  Sh'ipme* 


Following  up  with 
ticKlelr 


Sending  copies  to 
depts  interested 


Copy  tolive  Fife" &f 
filing  requisition  \ 


Making  out  order 
Checking  &maili> 


Final  negotiations 
asto  price.terms.  ' 


Requisition 


Making         Receiving 
Comparisons    Quotations 


Checking  for 
Validation 


Checking  with 
production  order 


Checking  with 
may.  <Jb  fnin. 


fast  purchases 
&,  performances 


See  if  material  is 
property  specified 


Price.  Terms  and 
delivery 


Sending  out 
inquiries 


FIGURE  No.  8.— Chart  of  procedure  from  time  requisition  is  received  until 
order  is  completed, 


68 


PURCHASING 


the  department  if  possible  —  some  establishments  are 
so  extensive  that  this  cannot  be  done  and  they  are 
passed  along  to  an  assistant.  The  department  will 
have  a  list  of  the  men  authorized  to  sign  requisitions 
and  they  must  be  examined  to  see  that  they  are  signed 
by  a  properly  authorized  person  and  that  the  classifi- 
cation of  material  is  stated.  In  a  manufacturing  es- 
tablishment it  may  be  necessary  to  check  it  with 
production  order,  also  with  maximum  and  minimum 


(Sending  to\ 
\ccountctni 


\pproving 


\Recordinc 


(fttrchcrsir 
Agent 


Checking 
Extensions 


'Checking 
vi  th  mate 
received 


jssifying 


(Check'im 
Prices,  Ter/,,^ 
\and  Freight  i 


\Recordincf\ 
ice  char, 


FIGURE  No.  9.— Invoices  must  go  through  a  fixed  course  and  over  a  route 
which  will  insure  their  being  systematically  checked  and  approved  as 
indicated  in  this  chart. 


SYSTEM  OF  PROCEDURE  69 

and  past  purchases.  The  proper  specification  of 
material  will  have  to  be  obtained  from  records  and 
attached  to  requisition.  The  price  will  then  be  in- 
vestigated, and  if  it  is  an  established  one,  the  order 
can  probably  be  placed  at  once;  if  not,  quotations  will 
have  to  be  obtained  and  compared,  submitted  to 
purchasing  agent  for  final  negotiating,  and  will  then 
follow  the  same  course  as  those  orders  for  which  no 
quotations  were  obtained.  The  chart  clearly  indi- 
cates the  final  course  the  orders  take. 

Invoice  Procedure 

All  invoices  coming  into  the  purchasing  department 
follow  a  course  similar  to  that  outlined  in  Figure  9. 
The  various  steps  are  shown  with  sufficient  clearness 
to  enable  the  procedure  to  be  closely  followed.  In 
some  establishments  some  of  these  steps  may  be  cut 
out;  such  as,  checking  with  material  received,  and 
checking  extensions,  which  may  be  done  in  the  ac- 
counting department.  All  the  features  connected  with 
the  approval  of  the  invoices  have  to  be  accomplished 
in  one  department  or  the  other  before  they  are 
vouched  for  payment. 

Stores  Procedure 

Figure  10  shows  the  system  followed  by  the  store- 
keeper. On  the  left  the  course  of  procedure  is  indi- 
cated in  receiving  and  checking,  storing  and  recording 
material.  On  the  right  are  the  deliveries  of  material 
to,  also  material  received  back  from,  shop.  All  three 
of  these  finally  get  on  to  the  perpetual  inventory  and 
from  there  follow  an  identical  route.  Scrap  received 
into  stores  is  shown  on  a  course  of  its  own,  so  also  is 


70 


PURCHASING 


1 


ft 

••VT 

5^5 


t 


8 


<& 

£ 

*s 


^ 


4»|f 

^'    -^ 

<  ^\       s  S* 
55.^       SiSs 

I   'ir/ 


Is 


-K  I 

' 


II 


SYSTEM  OF  PROCEDURE  71 

the  work  connected  with  production  orders,  if  this  is 
handled  by  the  storekeeper. 

Inspection  Procedure 

Inspection  is  not  properly  part  of  the  internal  work 
of  the  purchasing  department,  and  is  not  therefore 
shown  on  above  charts.  Nevertheless  it  cannot  be 
ignored  in  arranging  the  methods  of  procedure. 
Copies  of  certain  orders  with  instructions  must  be 
sent  to  the  inspector  and  reports  will  be  received  from 
him.  Invoices  may  have  to  be  held  until  these  come 
in.  The  relation  which  inspection  bears  to  the  other 
functions  of  the  organization  is  shown  in  Figure  5  in 
the  preceding  chapter. 

Traffic  Procedure 

If  the  work  connected  with  transportation  matters 
is  handled  in  the  purchasing  department,  a  system 
of  doing  it  must  be  devised  on  the  following  lines. 
Information  and  data  must  be  recorded  and  kept 
handy  for  reference  in  a  manner  similar  to  that  out- 
lined for  purchasing  records.  The  system  of  records 
must  comprise  the  following: 

Freight  classification  of  goods. 

Rates  from  his  own  and  competitors'  shipping  points. 

Switching  and  terminal  charges. 

Record  of  business  done  with  each  railroad  company. 

The  following  is  the  routine  work  which  will  have  to 
be  systematized: 

Defining  the  manner  in  which  goods  shall  be  packed. 

Routing  of  all  freight. 

Making  arrangements  with  transportation  com- 
panies for  shipments. 


72  PURCHASING 

Arranging  for  all  teaming. 

Tracing  shipments  when  delayed. 

Getting  proper  receipts  for  shipments. 

Checking  and  approving  all  freight  and  teaming 
charges. 

Handling  all  claims  against  transportation  com- 
panies. 

A  reference  to  Figure  5  shown  in  preceding  chapter 
will  indicate  where  the  traffic  function  comes  in  con- 
tact with  the  other  work  of  the  organization. 


CHAPTER  VIII 

OBTAINING  AND  TABULATING  PROPER  RECORDS 

The  Collection  and  Recording  of  Data  and 
Information 

THE  following  chapters  will  describe  the  actual 
operation  of  a  purchasing  department.  In  doing 
this  a  description  or  illustration  of  the  forms  to  be 
used  and  any  other  equipment  which  may  be  required 
for  doing  the  work  will  be  given.  The  compiling, 
assembling,  and  keeping  the  data  and  records,  while 
perhaps  not  the  most  important  section  of  the  work 
of  the  office,  have  been  mentioned  first  in  previous 
chapters  and  will  be  so  dealt  with  here.  It  is  essen- 
tial that  it  be  kept  in  compact  and  concise  form  and 
intelligently  arranged  for  easy  reference.  It  is  not 
radically  different  from  corresponding  work  in  any 
other  office,  but  there  are  some  special  features  con- 
nected with  it  which  need  close  observation. 

One  thing  which  should  never  be  lost  sight  of  is 
that  there  is  no  finality  to  this  work.  When  a  requisi- 
tion comes  into  the  department  and  is  disposed  of  in 
the  regular  way,  the  order  placed,  material  received, 
and  invoice  approved,  that  requisition  and  order  are 
"dead."  It  is  quite  different  with  the  recording  of 
information,  as  this  must  be  kept  active  and  alive. 
It  is  true  that  some  recorded  data  will  become  obso- 
lete, such  as  prices  for  instance,  but  these  should  be 
superseded  by  prices  wrhich  are  current  and  represent 


74  PURCHASING 

the  market  of  today.  A  price  or  quotation  may  be 
five  years  old  and  yet  if  it  represents  the  latest  market 
figure  it  is  alive  and  in  force. 

The  accumulation  of  reliable  records  is  probably 
more  essential  for  the  purchasing  office  than  for  any 
other  department  of  a  business.  It  is  the  memory  por- 
tion of  the  brain  of  the  department.  A  substantial 
proportion  of  these  records  can  be  compiled  from  the 
actual  transactions  which  take  place  in  the  department 
itself,  but  there  are  other  facts  which  are  necessary 
accessories  and  which  can  be  obtained  from  the  other 
departments  and  from  outside  sources.  A  reference 
to  Figure  7  in  last  chapter  will  make  this  better  under- 
stood. 

Some  offices  will  require  much  more  information 
than  others  —  it  will  depend  on  the  nature  of  the 
business.  The  staff  should,  then,  be  organized  to 
take  care  of  this  condition.  The  methods  of  doing 
this  work  will  be  outlined,  but  it  must  be  remembered 
that  in  very  small  establishments  it  will  only  take  part 
of  the  time  of  one  person,  while  in  very  large  ones 
several  people  may  be  engaged  on  the  work. 

The  purchasing  agent  should  energize  the  movement 
and  appoint  some  member  of  his  staff  to  take  charge  of 
it.  His  personal  activity  will  be  necessary  in  occa- 
sionally visiting  the  sources  from  which  he  is  getting 
his  largest  and  most  important  supplies  and  other 
plants  manufacturing  goods  of  a  similar  nature.  By 
observation  and  inquiries  he  will  learn  a  great  deal 
which  will  be  very  useful.  Notes  of  all  these  points 
should  be  made  and  properly  recorded  on  his  return 
to  the  office.  These  visits  of  the  purchasing  agent 
will  enable  him  to  get  some  impressions  and  will  give 


TABULATING  PROPER  RECORDS       75 

him  a  mental  picture  which  will  be  exceedingly  valu- 
able and  which  could  never  be  acquired  from  any  data 
obtained  through  other  channels. 

Catalogues 

It  is  a  practice  with  some  purchasing  agents  to  de- 
cry the  utility  of  catalogues.  Certainly  some  of  them 
do  not  tell  one  much,  and  if  they  are  accompanied  by  a 
price  list  and  discount  sheet  they  are  used  merely  to  get 
a  comparative  price.  For  any  purchase  of  importance 
an  endeavor  should  be  made  to  secure  better  figures. 
Nevertheless,  it  must  be  admitted  that  there  comes  a 
time  when  catalogues  are  perused  and  assiduously 
searched  for  some  particular  thing  or  information. 
This  is  the  experience  of  both  large  and  small  buyers. 
It  is  expedient  therefore  to  obtain  a  good  library  of 
catalogues  which  bear  any  relation  to  the  character 
of  the  purchases. 

If  one  goes  into  any  public  library  some  good  ideas 
can  be  obtained  about  storing  and  keeping  books  for 
ready  reference,  also  the  amount  of  space  required, 
the  necessary  clearances,  average  size  of  books,  depth 
of  shelves,  etc.  If  it  is  proposed  to  establish  an 
extensive  catalogue  library,  it  would  be  advantageous 
to  have  special  bookcases,  shelves,  and  receptacles 
made.  They  will  prove  to  be  cheaper  than  extension 
bookcases  and  can  be  arranged  to  suit  the  space 
available.  There  are  several  methods  of  filing  the  cat- 
alogues and  the  best  is  undoubtedly  to  arrange  them 
according  to  size.  It  will  be  found  that  they  can  be 
segregated  into  about  six  dimensional  divisions  and 
the  shelves  can  be  spaced  to  suit.  There  will  be  a 
great  many  more  catalogues  of  the  medium  sizes  than 


76 


PURCHASING 


of  the  largest  or  smallest,  therefore  more  shelf  space 
must  be  allotted  to  these. 

This  scheme  will  work  out  somewhat  as  shown  in 
Figure  11.  All  catalogues  must  be  numbered  on  a  la- 
bel pasted  on  the  back,  or  if  the  book  is  not  sufficiently 
large  then  paste  it  on  the  front  in  the  left-hand  top 


LMJ 
FIGURE  No.  11.  —  Sketch  of  arrangement  of  shelves  for  catalogues. 

corner.  Commence  numbering  the  top  row  one  and 
upwards.  If  it  is  a  small  case,  the  second  row  will 
commence  at  200,  the  third  row  at  300,  and  so  on. 
Larger  catalogue  cases  (fan  have  the  second  row  com- 
mence at  500,  the  third  at  1000,  etc.  But  perhaps  a 
better  way,  if  the  collection  is  very  large,  is  to  com- 
mence the  top  row  T>  second  row  T>  third  row  -y,  etc. 
All  these  methods  are  distinctive  in  that  they  desig- 


TABULATING  PROPER  RECORDS       77 

nate  which  shelf  the  catalogue  is  on  and  it  can  be 
located  instantly.  If  the  shelves  are  exceptionally 
long,  they  can  be  subdivided  by  distinctive  numbering 
for  each  section.  This  can  easily  be  figured  out  as 
the  catalogues  accumulate. 

The  shelves  as  described  take  care  of  all  stiff,  bound 
catalogues,  but  there  will  be  also  a  great  many  pam- 
phlets, circulars,  etc.,  which  it  will  be  necessary  to 
keep  and  file.  These  can  be  placed  in  folders  similar 
to  correspondence  folders,  keeping  as  far  as  possible  all 
printed  matter  on  one  subject  in  the  same  or  adjacent 
folders. 


NAME  OF  MANUFACTURER 

ADDRESS 

SHELF 

CAT.  No. 

FIGURE  No.  12. — Card  for  indexing  catalogues  under  name  of  material.    Size 
4x6  inches.     Color  should  contrast  with  card  shown  in  figure  No.  13. 

All  catalogues  will  then  have  to  be  cross  indexed, 
filing  one  card,  as  shown  in  Figure  12,  under  the  ma- 
terial or  subject  index  and  the  other,  Figure  13,  under 
the  index  " manufacturers'7  or  " suppliers."  These  two 
cards  should  be  different  colors,  as  this  is  a  precaution 
against  their  being  placed  in  the  wrong  filing  drawer. 


78  PURCHASING 

It  is  sometimes  found  convenient  to  keep  the  drawers 
containing  these  index  cards  on  the  desk  or  within 
reach  of  the  person  using  them  most  frequently.  If, 


NAME  OP 
MAN'F'R. 

SHELF 

No. 

A 

48 

ADDRESS 

LIST  OF  MATERIAL  MANUFACTURED 


FIGURE  No.  13. — Card  for  indexing  catalogues  under  name  of  manufacturer. 
Size  4x6  inches. 

however,  the  bookcase  has  been  built  specially,  it  is 
possible  for  it  to  be  so  designed  as  to  include  these 
drawers,  also  the  drawers  for  folders  as  an  integral 
part  of  it,  making  all  the  catalogues,  pamphlets,  circu- 
lars, and  their  indexes  self-contained  in  one  piece  of 
furniture.  See  sketch,  Figure  14,  which  illustrates 
approximately  the  manner  in  which  this  can  be  done. 

Sources  of  Supply 

The  record  of  sources  from  which  materials,  goods, 
and  supplies  can  be  obtained  should  be  revised  con- 
stantly and  kept  up  to  date.  It  is  not  sufficient, to 
keep  a  list  of  manufacturers  from  whom  purchases 
are  regularly  made.  They  may  be  the  ones  who  have 
been  best  able  to  supply  requirements  in  the  past  and 


TABULATING  PROPER  RECORDS 


79 


are  in  the  best  position  to  do  so  at  present,  but 
changes  are  continually  taking  place  and  new  manu- 
facturers coming  into  the  market  better  equipped  per- 
haps than  the  old  ones.  If  the  market  seems  too 
narrow  or  it  is  felt  it  is  not  broad  enough  for  purchases 
to  be  made  to  the  best  advantage,  then  persistent 


J    L 


a 
O 


a 


a 


a 


M         LJ 

FIGURE  No.  14.  —  Sketch  of  book  case  for  catalogues  showing  arrangement 
for  filing  pamphlets  and  circulars,  with  index  drawers. 

endeavors  should  be  made  to  obtain  information  to 
rectify  this.  Tabulate  any  data  acquired,  make  notes 
from  correspondence  before  it  is  filed  as  to  character 
of  goods  made  by  concern  the  letter  was  from,  also 
notes  of  anything  salesmen  say  they  are  prepared  to 
quote  on  or  supply.  A  great  deal  of  valuable  informa- 
tion will  soon  be  accumulated  which  can  be  collected 
on  cards,  if  the  market  is  assiduously  searched. 


80  PURCHASING 

There  is  a  limit  to  this  as  a  point  is  finally  reached 
where  the  supplier  is  located  at  such  a  distance  from 
where  the  material  is  to  be  consumed  that  questions  of 
freight  and  time  might  prohibit  their  being  considered. 
To  make  all  the  purchasing  records  of  greatest  value, 
they  must  represent  good  live  buying  prospects,  and 
not  be  encumbered  with  useless  and  unnecessary  in- 
formation. 

Some  offices  rely  on  the  catalogue  index  cards  for 
recording  these  data,  but  it  is  not  advisable.  Keep 
those  cards  for  the  one  purpose  only.  The  form  of 
card  needed,  or  the  one  best  suited  for  the  purpose, 
will  depend  on  the  nature  of  the  business.  A  sugges- 
tion for  a  card  is  offered,  see  Figure  15.  A  code 
rating  of  one's  own  can  be  adopted  which  will  signify 
the  financial  standing  of  the  supplier,  whether  he 
makes  shipments  promptly,  whether  there  has  been 
any  trouble  with  his  goods;  in  fact,  all  information 
that  will  be  useful  and  which  can  be  put  on  the  card 
in  an  abbreviated  form. 

This  record  of  sources  of  supply  is  intended  to 
furnish  information  not  given  in  catalogues.  It  will 
keep  the  purchasing  agent  posted  as  to  where  he  can 
buy  cheapest  and  best  and  get  treated  right.  A  sales- 
man keeps  himself  posted  as  to  good  live  prospects, 
why  not  the  buyer?  Inquiries  will  then  reach  only 
those  who  are  keen  for  the  business,  and  the  quota- 
tions received  will  represent  the  best  prices  obtainable 
from  the  most  reliable  sources.  Undesirable  bidders 
will  be  eliminated  when  inquiries  are  sent  out,  and  a 
remarkably  high  percentage  of  efficiency  maintained. 


TABULATING  PROPER  RECORDS 


81 


0} 

O 

I 

K 

M 

s 

c» 

( 

1 
J5 

1 

C 

0 

£ 

-< 

1.1 

Si 

11 

1 

g 

P^OJ 

> 

1 

II 

"S 

g 

6 

H 

M  5- 

_ 

M 

o 

a 

^ 

-b 

o> 

g 

"•a 

OT 

u 

9 

5 

0) 

^ 

r/^ 

^ 

•°  ^ 

£ 

P 

'S.& 

£ 

O 

aS 

o  *s 

§ 

c 

H 
1 

^£ 

O     ^ 

1 

1 

flH 

bog 

J   o 

s 

5 

'a'i 

H    +f> 

i 

w 

1 

l£ 

3    OQ 

as 

£ 

^> 

i'S 

1 

"1 

<s 

^a 

0 

•|    * 

1 

I 

_rt     O 

11 
^  « 

d 

fL,    ^ 

.2 

&  So 

I 

00  'S 
"5 

*3 

|J 

1 

- 

^  s 

« 

I 

PH    a) 

1  -° 

" 

A 

i 

2  § 

! 

a 

^^      C5 

O    SR 

|i 

> 

3 

zl 

1 

P 

^ 

^ 

w   d 

q 

g      «F- 

1 

"e; 

H 
< 

r 

1 

82  PURCHASING 

Record  of  Past  Purchases 

A  combination  may  be  effected  by  some  concerns 
in  recording  some  of  the  other  information.  Where 
a  record  is  kept  of  purchase  orders,  it  is  sometimes 
done  in  such  a  way  as  to  analyze  the  heaviest  pur- 
chases, by  which  the  totals  for  the  year  can  be 
found  with  the  prices  paid;  but  it  is  not  entirely  sat- 
isfactory, for  it  frequently  means  a  complication  of 
figures  which  do  not  convey  clearly  and  concisely 
the  desired  information.  There  are  many  manufac- 
turing establishments  which  do  not  have  the  faintest 
conception  of  the  quantities  of  each  article  or  material 
which  they  buy  in  a  year,  or  any  given  period,  but 
just  order  in  a  haphazard  way  for  immediate  require- 
ments or  when  stock  is  low.  Very  little  work  is  en- 
tailed in  keeping  a  record  of  such  purchases,  and  when 
the  consumption  for  a  given  period  is  a  known  quan- 
tity, buying  can  be  done  more  intelligently  and  to 
better  advantage.  It  is  patent  to  any  one  that  if  a 
purchasing  agent  has  definite  and  positive  information, 
such  as  indicated,  he  can  face  the  market  with  assur- 
ance and  not  be  buying  quantities  on  guesswork. 
Such  data  also  would  be  exceedingly  valuable  to  the 
persons  in  charge  of  the  various  departments  where  the 
goods  were  used. 

A  record  should  be  kept  of  everything  with  prices 
paid.  Simple  forms  for  this  purpose  are  shown  in 
Figures  16  and  17.  These  can  be  elaborated  on  as 
much  as  necessary,  so  long  as  useful  information  is 
being  recorded,  but  duplication  should  be  avoided. 
In  small  establishments  the  stores  perpetual  inventory 
may  be  used  for  this  purpose  if  it  is  kept  in  the  purchas- 
ing office,  but  if  not,  one  cannot  send  to  the  storekeeper 


TABULATING  PROPER  RECORDS 


83 


•< 

& 


~     X 
—    lO 

Si  <x> 

i! 


J 


II 

!g 


84 


PURCHASING 


11 


'to 


O 


•a  § 

i-s 
-1 

II 


-s 


f  I 

*"*    *§ 

6  co 


TABULATING  PROPER  RECORDS       85 

to  obtain  this  information  every  time  it  is  needed. 
The  main  object  to  be  served  is  to  have  a  correct 
account  of  the  total  quantity,  also  the  total  value 
purchased  of  each  article  during  three,  six,  or  twelve 
months,  with  the  prices  paid.  This  will  give  an  excel- 
lent basis  on  which  to  estimate  the  requirements  for 
a  similar  period  ahead,  and  one  can  go  into  the 
market  intelligently,  obtain  better  prices,  and  arrange 
deliveries  exactly  in  accordance  with  the  known 
wants.  The  sizes  mentioned  as  suitable  for  forms 
shown  in  Figures  16  and  17  can,  of  course,  be  changed 
to  include  any  additional  information  which  individual 
conditions  demand. 

The  Purchase  Record 

A  complete  record  of  all  purchases  is  a  positive 
necessity  in  some  establishments  for  financial  reasons. 
The  purchasing  agent  may  be  called  upon  at  any 
time  to  say  what  the  exact  amount  of  the  purchases 
is  for  a  given  period,  and  how  much  will  become 
due  for  payment  in  the  following  month  or  within  a 
specified  time.  In  other  places  this  necessity  may  not 
exist,  but  nevertheless  a  record  should  be  kept.  It  is 
not  wise  for  the  buyer  to  go  along  placing  orders,  not 
knowing  the  aggregate  value  of  the  material  and 
supplies  purchased.  He  may  not  be  exceeding  the 
maximum  allowable,  and  he  may  be  buying  strictly  for 
the  requirements  of  the  business,  but  if  the  purchases 
are  for  delivery  one,  two,  three,  or  even  four  months 
ahead,  he  should  know  the  value  of  the  transactions 
he  has  closed  and  the  man  in  charge  of  the  finances 
should  know  the  exact  amount  of  the  obligations  he 
has  to  take  care  of. 


86 


PURCHASING 


ft 

I 

1 

N 

a 

§ 

1  . 

1 
3 

0  '| 

H 

|| 

*o 

1  1 

H 
O 

« 

bC  ^ 

C        J  rX 

*N    ^S 

1 

a 

^1 

3 

-u    o 

SOD 

1 

fl      § 

g 

|J 

a  1 

s 

03  -^3 

1 

|| 

1 

eg     rt 

rS    S 

1 

°°    bO 

^  J 

W 

O  T3 

1 

55  I 

1 

«     « 

1 

TABULATING  PROPER  RECORDS       87 

Figure  18  shows  a  method  of  recording  orders  with 
a  scheme  for  analyzing  the  dates  of  payment  over 
the  three  subsequent  months.  The  totals  for  each  of 
these  months  can  be  kept  in  pencil  figures  each  day 
and  a  summary  of  the  three  at  end  of  the  month  will 
be  the  grand  total  of  the  purchases  for  that  month. 
This  information,  also  the  information  on  past  pur- 
chase record,  would  be  posted  from  the  copies  of 
purchase  orders  in  much  the  same  way  as  invoices 
are  posted  into  a  ledger. 

There  have  been  forms  designed  which  combine  the 
four  following  records  on  one  sheet: 

Purchase  order  record. 

Invoice  record. 

Stores  record. 

Material  price  record. 

It  is  possible  there  is  a  business  the  nature  of  which 
would  permit  this  to  be  done,  but  it  has  never  come 
under  the  notice  of  the  writer.  The  idea  is  to  enter 
the  amount  of  order  in  first  column,  in  the  second 
column  a  record  of  invoice,  the  third  and  fourth 
columns  being  for  stores  record.  But  such  a  scheme 
makes  it  imperative  that  there  shall  be  only  one  in- 
voice for  each  order  issued,  one  entry  into  stores,  and 
the  whole  material  delivered  from  stores  at  one  time, 
because  there  is  only  one  line  used  for  each  order. 
It  is  an  impossible  condition  in  any  ordinary  business, 
but  is  given  here  as  a  suggestion,  as  some  might  be 
able  to  adopt  it.  Generally,  however,  it  can  be 
demonstrated  that  separate  records  are  very  much 
better  from  every  point  of  view.  If  too  many  records 
and  figures  are  kept  on  one  sheet  they  have  a  tendency 
to  become  so  involved  as  not  to  be  readily  decipher- 


88 


PURCHASING 


1 

I 


I 


g-2 

c3  -S 


i 


es 


TABULATING  PROPER  RECORDS       89 

able.     Practically  little  additional  work  is  necessary 
in  keeping  separate  records. 

Record  of  Quotations 

The  record  of  quotations,  Figure  20,  will  be  com- 
piled from  various  sources.  Salesmen  who  call  are 
always  ready  to  quote  prices  for  something  they  are 
interested  in,  but  which  at  the  time  may  have  no 
immediate  interest  for  the  purchasing  agent.  A  note 
should  be  made  to  go  on  the  quotation  card,  also  any 
prices  quoted  in  correspondence.  Even  if  it  is  some- 
thing not  bought  before,  keep  a  record;  it  is  a  good 
thing  to  know  prices  of  any  article.  While  it  is  not 
to  be  inferred  that  records  should  be  kept  of  goods 
which  are  absolutely  and  entirely  foreign  to  the  busi- 
ness one  is  engaged  in,  nevertheless  the  widest  pos- 
sible knowledge  of  prices  is  valuable  to  a  purchasing 
agent.  Common-sense  should  determine  how  far  to 
go  in  this  direction.  When  the  comparison  of  quota- 
tions card  is  made  up  from  inquiries  sent  out,  turn 
it  over  to  the  record  clerk  and  let  him  post  the  prices 
on  this  form;  they  will  be  valuable  for  future  refer- 
ence. It  is  not  necessary  to  duplicate  the  record  of 
prices  already  posted  on  the  card  of  past  purchases; 
that  card  is  a  record  of  goods  actually  bought.  The 
quotation  card  should  contain  quotations  from  other 
firms  for  similar  material,  together  with  all  other 
prices  which  can  be  collected  from  time  to  time. 

Specifications 

Standard  specifications  should  be  drawn  up  for  all 
material  used  in  production  work,  and  for  supplies 
of  every  kind  and  nature  used  around  a  plant  there 


90 


PURCHASING 


• 

i 

sj 

• 

PH 

0 

% 

9 

•  I       i  ; 

g 

. 

Q 

:              :     : 

i 

3  a 

. 

M 

li 

:             :     : 

o  > 

w  3 

;        ;        ;        ;        ; 

s 

I        '.                 '.'.'. 

w 

p* 

j        fo 

00 

£ 

4             PH 

;    S 

'.        '.                 '.'.'. 

]         a 

t      w  « 

« 

. 

1 

g 

11     Mi 

B 

Q 

H 

3 

H 

c 

1 

i    ;         '.'.'. 

^ 

& 

a 

\    '.         '.    i    '. 

g 

s 

RER'S  NA 

-    •         '.'.'. 

0 

§ 

I              P 

fc 

3           •«! 

2      S 

TABULATING  PROPER  RECORDS       91 

should  be  a  proper  description,  clear,  concise,  and 
worded  in  such  a  manner  as  to  leave  no  misconcep- 
tion in  the  mind  of  bidders  or  suppliers  as  to  the 
article  mentioned.  When  this  information  is  obtained 
and  understandingly  collected  for  easy  reference,  it 
serves  many  good  purposes.  It  will  enable  the  pur- 
chasing agent  to  secure  prices  without  any  doubts 
arising  among  the  bidders  as  to  what  is  actually 
wanted,  and  will  prevent  references  being  made  back 
to  him  for  more  definite  information.  The  purchasing 
agent  will  positively  know  when  he  receives  bids  that 
they  have  all  figured  on  the  same  grade  of  material, 
and  his  comparison  of  quotations  will  mean  real  com- 
petitive prices. 

This  procedure  will  also  enable  the  various  supplies 
used  in  a  plant  to  be  standardized.  One  department 
may  requisition  a  certain  size  and  kind  of  broom, 
another  department  may  requisition  the  same  kind 
but  a  different  size.  It  may  be  found  that  one  size 
of  one  description  will  answer  for  the  whole  estab- 
lishment. All  office  furniture  and  stationery  should 
be  standardized.  The  furniture  is  then  interchange- 
able and  can  be  bought  to  better  advantage.  One  can 
go  into  many  large  offices  and  find  two  or  three  makes 
of  filing  cabinets,  whereas  one  manufacturer  would 
have  been  glad  to  supply  all  that  was  required,  and  at 
a  lower  price  than  was  paid  for  the  separate  purchases. 

The  specifications  of  material  used  in  production 
can  be  drawn  by  the  engineers,  based  on  scientific 
knowledge  of  what  is  required,  and  on  the  action  of 
the  material  in  the  course  of  its  manipulation  through 
the  shop  and  in  the  finished  product.  These  specifica- 
tions may  be  short  or  lengthy.  They  should  be  type- 


92  PURCHASING 

written  or  printed  according  to  the  frequency  with 
which  the  orders  are  issued  and  the  quantity  used, 
and  kept  ready  to  send  out  with  inquiries  or  orders. 
The  original  copy  with  copies  of  all  changes,  modifi- 
cations, or  amendments  should  be  kept  in  folders  and 
indexed.  The  description  of  supplies  can  in  many 
cases  be  condensed,  and  entered  on  the  heading  of  the 
card  recording  past  purchases. 

Inspection  Reports;    Analyses  and  Tests 

All  reports  made  by  the  inspectors  on  material  dur- 
ing progress  of  fabrication  and  before  shipment  to  the 
buyer,  belong  to  the  division  of  the  office  having 
charge  of  the  routine  work  in  following  up  the  orders; 
but  these  reports  should  pass  through  the  hands  of  the 
record  clerk  so  that  he  can  note  on  his  records  any 
items  in  them  which  would  make  his  information 
more  complete.  Some  establishments  keep  an  in- 
spector for  examining  all  material  on  arrival  at  factory 
and  his  reports  should  be  sifted  in  like  manner.  A 
large  amount  of  valuable  and  instructive  data  can  be 
gathered  from  these  to  be  posted  on  the  sources  of 
supply  record,  Figure  15.  A  form  of  inspection  report 
is  shown  in  Chapter  X,  Figure  36. 

In  construction  work  inspection  and  tests  are  made 
of  all  important  purchases  of  material  before  shipment 
and  where  this  is  not  done  samples  are  taken  after 
delivery,  of  such  things  as  cement,  steel  castings,  etc. 
for  the  purpose  of  analyzing  and  testing.  Copies  of 
these  analyses  should  go  to  the  purchasing  agent's 
office  and  be  put  on  record. 

In  a  manufacturing  plant,  if  a  laboratory  is  main- 
tained for  making  chemical  analyses  and  machines 


TABULATING  PROPER  RECORDS       93 

for  physical  tests  are  available,  it  puts  a  powerful 
weapon  in  the  hands  of  the  purchasing  agent.  He 
can  have  recourse  to  these  and  determine  positively 
that  he  is  being  supplied  with  what  he  bought.  These 
analyses  and  tests  are  also  exceedingly  helpful  to  the 
engineering  department  and  the  ability  to  determine 
the  composition  and  strength  of  materials  is  of 
great  utility  and  economic  value  to  the  produc- 
tion department.  Many  manufacturers  depend  on 
the  suppliers  to  make  tests  and  suggest  to  them 
the  most  suitable  composition  of  their  raw  material, 
thus  placing  themselves  under  obligations  to  them. 
With  one's  own  laboratory  the  experiments  can  be 
carried  on  in  the  plant  and  without  outside  assistance, 
which  leaves  the  purchasing  agent  a  free  hand  in 
buying.  The  tests  made  for  production,  engineering, 
or  purchasing  department  should  go  on  record  in  a 
similar  manner  to  the  specifications.  This  applies 
also  to  all  reports,  tests,  or  observations  made  on 
material  and  supplies  during  progress  through,  or  use 
in,  the  whole  establishment.  Consistently  kept  up,  it 
will  result  in  a  remarkably  high  degree  of  efficiency 
in  securing  the  very  best  materials  and  supplies  for 
the  satisfactory  and  economical  operation  of  any 
plant,  and  the  maintenance  of  its  product  at  a  fixed 
standard  of  excellence. 


A 

CHAPTER  IX 

WORK  CONNECTED  WITH  REQUISITION  AND  ORDER 

Examining  and  Checking  Requisition 

THE  requisition  is  in  some  respects  the  most  im- 
portant document  which  comes  into  the  pur- 
chasing department.  It  is  the  basis  for  all  purchases; 
from  it  emanate  practically  all  the  activities  asso- 
ciated with  every  purchase ;  in  fact  no  purchase  should 
be  made  without  a  requisition.  Owing  to  its  impor- 
tance it  is  absolutely  essential  it  should  be  thoroughly 
checked  and  examined  to  enable  the  subsequent  work 
connected  with  it  to  proceed  with  accuracy  and  dis- 
patch. After  perusing  the  remarks  which  follow  in 
regard  to  the  preparatory  work  on  a  requisition,  it 
will  be  fully  realized  how  necessary  it  is  to  have  the 
information  records  described  in  the  last  chapter  in 
good  shape  and  fully  up  to  date. 

A  form  of  requisition  is  shown  in  Figure  21  which 
would  answer  for  a  manufacturing  establishment;  for 
some  kinds  of  construction  work  it  is  not  so  suitable. 
Modifications  can  be  made  in  any  of  the  forms  illus- 
trated here  as  the  needs  of  the  case  dictate.  Whatever 
the  nature  of  the  business  there  must  be  a  requisition 
for  every  purchase  made.  It  may  be  in  duplicate  or 
triplicate  according  to  the  method  of  procedure.  In 
most  cases  it  is  in  duplicate,  the  original  going  to  the 
purchasing  department,  and  the  copy  being  kept  in 
the  department  where  it  originated.  In  such  cases  a 


THE  REQUISITION  AND  ORDER 


95 


copy  of  the  purchase  order  would  be  sent  to  the 
maker  of  the  requisition.  An  alternative  method  is 
to  send  two  copies  to  the  purchasing  department, 
where  one  is  marked  with  order  number,  date  of  deliv- 
ery, and  other  particulars,  and  returned  to  the  maker. 


PURCHASE  REQUISITION 


DATE- 


REQUIRED  FOR- 


REQ.  No.- 
Accr.  NO- 


DELIVERY  WANTED- 
QUANTITY  IN  STOCK. 


.DELIVER  TO- 


-MAX.- 


-MlN. 


APPROVED. 


.  SIGNED- 


THIS  SPACE 
FOR  USE  IN 
PURCH'G  DEPT. 


CHECKED  BY 

PRICE TERI 

ORDERED  FROM— 


.SPEC.  No 

_  ORDER  No. 


FIGURE  No.  21. —  Purchase  requisition.  This  form  is  suitable  for  a 
manufacturing  establishment  and  can  be  of  a  size  convenient  to 
describe  the  goods  usually  requisitioned. 

The  former  method  is  usually  preferred  as  it  involves 
less  work. 

It  is  absolutely  imperative  that  the  requisition 
should  be  signed  by  some  authorized  person,  and  that 
the  quantity  and  description  of  material  required  be 
clearly  and  distinctly  stated;  also  date  delivery  is 
wanted.  These  things  are  indispensable  in  any 


96  PURCHASING 

requisition;  other  information  is  necessary  in  some 
cases,  but  optional  in  others.  Requisitions  for  ma- 
terial going  into  storeroom  should  state  quantity  on 
hand,  maximum  and  minimum  allowable,  and  for  what 
purpose  required.  These  particulars  are  not  always 
available  in  construction  work,  but  other  details, 
depending  on  location  and  class  of  work,  would  be 
necessary. 

The  requisitions  must  be  numbered.  If  the  busi- 
ness is  a  very  large  one  with  many  departments,  they 
can  be  numbered  when  printed  and  a  letter  placed 
before  the  number  to  distinguish  the  department,  or 
they  can  be  numbered  as  they  arrive  in  the  purchas- 
ing department.  In  the  latter  case  the  copy  kept  by 
the  department  making  the  requisition  can  have  its 
number  inserted  when  they  receive  copy  of  order,  as 
it  will  appear  on  that. 

Requisitions  for  some  materials  and  always  for 
supplies  should  be  made  at  regular  and  stated  inter- 
vals. This  will  enable  the  purchasing  agent  and  store- 
keeper to  keep  better  track  of  the  quantities  being 
used,  will  enable  the  purchasing  agent  to  buy  fixed 
quantities  at  stated  periods,  and  will  simplify  the  work 
of  both  offices  and  make  the  course  of  procedure 
easier. 

All  requisitions  should,  if  possible,  go  through  the 
purchasing  agent's  hands.  In  some  offices  this  is  not 
feasible  owing  to  the  large  number  of  requisitions 
which  come  through  for  small  items.  These  can  be 
dealt  with  by  an  assistant,  but  the  more  important 
requisitions  should  have  the  personal  attention  of  the 
head  of  the  department.  All  requisitions  will  first  be 
examined  to  see  whether  they  have  been  signed  by 


THE  REQUISITION  AND  ORDER  97 

some  person  with  the  necessary  authority  to  do  this. 
A  list  of  the  persons  authorized  to  make  requisitions 
should  be  kept  in  the  department.  They  must  then  be 
checked  with  production  order  and  with  the  maxi- 
mum quantity  or  amount  the  purchasing  agent  is 
allowed  to  order.  They  should  then  be  compared  with 
record  of  past  purchases.  The  object  of  this  being  to 
ascertain  the  quantity  used  in  a  given  period,  and  to 
determine  whether  they  should  be  bought  in  larger  or 
smaller  quantities.  In  this  connection  the  unit  cost 
of  delivery  has  to  be  considered.  The  purchasing 
department  is  not  a  commission  house  and  some  lati- 
tude must  be  allowed  it.  Always,  however,  strictly  in 
conformity  with  the  known  requirements  of  the 
business. 

It  will  also  be  necessary  to  see  that  the  material 
is  properly  described  or  specified,  and  if  necessary  a 
copy  of  the  standard  specifications  must  be  attached 
to  the  requisition.  It  has  already  been  pointed  out 
that  standard  specifications  and  proper  descriptions 
are  very  essential,  in  fact  they  are  indispensable  to 
good  buying. 

Pricing  Requisitions 

It  may  be  found  that  the  requisition  is  for  material 
for  which  a  price  has  been  agreed  for  a  fixed  period 
with  a  supplier,  also  terms  and  time  required  for  de- 
livery. In  such  cases  the  order  can  be  made  out  at 
once,  provided  the  requisition  has  passed  the  prelimi- 
nary checkings  and  examinations  satisfactorily. 

Frequently  arrangements  can  be  made  to  have  the 
material  carried  in  stock  by  the  manufacturer  and 
taken  as  required  by  the  purchaser.  The  prices 


98  PURCHASING 

would  of  course  have  been  arranged  to  cover  a  period 
of  probably  six  or  twelve  months,  the  buyer  being 
protected  on  an  advancing  market,  with  the  benefits 
of  a  declining  market  accruing  to  him.  It  may  look 
as  if  the  seller  is  taking  big  chances  of  making  losses 
instead  of  profits,  but  it  is  an  economical  possibility 
for  such  business  to  be  done  with  advantages  for  both 
sides,  and  probably  all  good  purchasing  agents  secure 
in  some  way  the  benefits  of  this  form  of  buying. 

In  determining  whether  the  quantities  requisitioned 
should  be  increased  or  decreased,  there  are  many 
factors  to  be  taken  into  consideration.  The  larger 
quantity  might  be  bought  cheaper  with  lower  trans- 
portation charges,  but  against  this  must  be  balanced 
the  disadvantages  of  stocking  too  much  material  and 
the  losses  it  would  entail  in  unremunerative  invest- 
ment, additional  insurance,  space  occupied,  possible 
depreciation,  etc.  There  are  many  other  considera- 
tions also  to  be  carefully  weighed  which  were  gone 
into  fully  in  previous  chapters. 

Obtaining  Quotations 

When  a  requisition  covers  material  for  which  there 
is  no  agreed  price  with  the  supplier,  or  when  the  price 
agreement  expires,  new  quotations  must  be  obtained. 
For  this  purpose  a  form  similar  to  Figure  22  can  be 
used.  Reference  should  be  made  to  the  sources  of 
supply  card  already  described,  and  the  inquiries  sent 
to  as  many  firms  as  are  necessary  to  get  the  lowest 
prices,  best  material,  and  suitable  delivery.  A  copy 
of  this  inquiry  with  a  list  of  all  people  it  was  sent  to 
must  be  kept  with  the  requisition  until  finally  disposed 
of. 


THE  REQUISITION  AND  ORDER 


99 


JOHN  DOE  &  COMPANY 

360  CANNON  STREET 
NEW  YORK  CITY 


191 


To. 


Please  quote  on  this  sheet  in  space  indicated  below  for  the  articles 
described.  If  you  are  unable  to  furnish  same  in  accordance  with  our 
description  and  wish  to  offer  a  substitute,  please  give  full  details. 

This  inquiry  is  in  duplicate,  original  must  be  returned  to  us  properly 
filled  out,  duplicate  to  be  retained  by  you. 

No  charges  will  be  allowed  for  packing  or  cartage. 
This  is  not  an  Order. 
Quotations  must  be  in  


ITEM 

QUANTITY 

DESCRIPTION 

LIST  PRICE 

DISCOUNT 

NET  PRICE 

To  JOHN  DOE  &  COMPANY. 

We  quote  you  as  above  F.O.B.. 


-Shipment  can  be  made 


in 

Terms- 
Date— 


.days  from  receipt  of  order. 


FIGURE    No.  22. — Form    of    inquiry    for   obtaining    quotations, 
letter  head  size. 


Regular 


100  PURCHASING 

When  these  quotations  arrive  in  the  office,  they 
should  be  entered  on  a  card  or  sheet  similar  to 
Figure  23.  It  may  be  found  more  convenient  to  enter 
the  names  of  all  the  people  who  have  been  invited  to 
tender  on  this  card  at  the  time  the  inquiries  are  sent 
out.  It  can  then  be  readily  seen  when  all  the  quo- 
tations are  in.  These  quotations  will  have  to  be  very 
carefully  considered  and  analyzed  and  scrutinized 
from  all  angles;  questions  of  freight  and  time  of  de- 
livery must  be  taken  into  account,  as  well  as  the 
reputation  and  past  performances  of  the  bidders. 
There  may  be  substitutes  offered  which  deserve  in- 
vestigation. Having  weighed  all  these  matters  care- 
fully and  everything  else  being  equal,  the  question 
of  price  should  be  the  deciding  factor.  All  of  these 
points  would  of  course  be  passed  upon  by  the  pur- 
chasing agent  himself,  the  comparative  statement  of 
the  bids  having  been  drawn  up  and  submitted  to  him 
by  the  price  clerk. 

Final  Negotiations 

It  may  be  necessary  at  this  stage,  if  the  order  is  an 
important  one,  for  the  purchasing  agent  to  interview 
some  of  the  bidders  in  reference  to  certain  phases 
and  details  of  their  quotations,  which  will  enable  him 
possibly  to  obtain  better  terms,  arrange  shipments 
to  fit  in  accurately  with  the  known  requirements, 
and  in  doing  this  make  it  easier  for  the  financial 
department. 

When  formal  invitations  have  been  sent  out  asking 
for  quotations,  then  letters  of  declination  should  be 
sent  to  unsuccessful  bidders.  Business  courtesy  de- 
mands this,  and  time  and  trouble  can  be  saved  by 


THE  REQUISITION  AND  ORDER 


101 


O  ^ 

c 

i 

£ 

c 

> 

fc 

c 

^ 

? 

| 

^< 
g 

| 

[ 

p 

J 

i 

\ 

• 

tf 

CD 

<U 

•S 

z  | 

.a 

a  3 

00 

£;o 

X 

02 

K  « 

co 

" 

O 

H 

g 

EH 

« 

g    1 

1 

1 

i 

o 

§  p 

4 

c 

! 

§ 

O 
I 

"o 

3 

D1 

fe 

fe 

*o 

g 

1 

3 

•  FH 

PH 

i 

S 

H 

8 

^ 

^ 

O 

6 

£ 

!z; 

1 

2 

s  NAME 

j 

04 

c 

H 

• 

Q 

i 

^ 

• 

h 
< 

« 

£ 

i 

! 

g 

c 

| 

| 

a 

< 
£ 

( 

,1 

t 

102  PURCHASING 

doing  it.  Neglect  in  notifying  bidders  imposes  on 
the  purchasing  agent  or  department  the  necessity  of 
answering  by  telephone  and  correspondence  questions 
regarding  quotations  which  have  long  since  been 
disposed  of. 


JOHN  DOE  &  COMPANY 

360  CANNON  ST. 
NEW  YORK 


To. 


GENTLEMEN, 

Referring  to   your  quotation  of- 
for 


we  have  to  advise  you  that  we  have  been  able  to  obtain  more  favorable 
figures  than  those  named  by  you,  and  the  order  has  been  placed. 

Thanking  you  for  the  attention  you  have  given  the  matter,  we  are 

Yours  very  truly, 

JOHN  DOE  &  COMPANY. 


Purchasing  Agent. 

FIGURE  No.  24. — Form  of  circular  letter  notifying  bidders  that  the  order 
has  been  placed. 

If  all  the  features  leading  up  to  this  stage  of  the 
transaction  are  reviewed,  it  should  reveal  a  situation 
in  which  the  purchasing  agent  can  be  positive  he  is 
in  a  position  to  close  it  on  the  most  favorable  terms 
and  conditions  possible.  Starting  with  his  sources  of 
supply  record,  if  this  has  been  kept  up  in  good  shape, 
he  knows  that  the  people  he  has  asked  for  quotations 


THE  REQUISITION  AND  ORDER  103 

are  the  very  best  in  the  country  to  furnish  him  with 
what  he  wants,  he  knows  they  are  in  a  better  position 
to  quote  him  favorable  prices  and  to  give  him  best 
service.  He  has  arrived  at  this  conclusion  by  a  process 
of  selection  and  elimination.  He  knows  his  specifica- 
tions have  been  correctly  and  accurately  drawn.  He 
knows  from  his  records  of  past  purchases  and  future 
requirements  the  exact  dates  on  which  he  must  have 
delivery,  and  having  arranged  terms  and  method  of 
payment  he  can  confidently  close  with  the  assured 
feeling  that  he  has  done  his  very  best,  and  brought 
the  negotiations  to  a  successful  conclusion. 

Orders  and  Method  of  Handling 

The  order  form  varies  considerably,  in  fact  it  would 
be  difficult  to  find  two  with  exactly  similar  wording, 
but  there  are  essential  features  in  all  which  are  in- 
tended to  convey  the  same  interpretation.  Figures 
25  and  26  show  forms  of  orders  which  will  be  found 
suitable  for  many  concerns.  In  filling  in  the  body 
of  the  order  it  should  be  stated  definitely,  clearly,  and 
concisely  what  is  required.  If  a  lengthy  specification 
is  necessary,  then  it  should  be  referred  to  by  a  dis- 
tinctive number  or  letter  and  date,  and  a  copy  at- 
tached to  the  order.  Any  drawings,  blue  prints,  or 
sketches  should  likewise  be  quoted,  and  they  should 
accompany  the  order.  If  it  is  an  order  for  some  minor 
supplies,  such  as  twine  or  wrapping  paper,  specify 
exactly  what  is  required.  The  proper  description  of 
all  the  standard  supplies  should  be  on  file  and  should 
be  referred,  to.  A  great  deal  of  time  may  be  saved 
by  doing  this.  A  manufacturer  would  probably  have 
several  grades  or  kinds,  all  of  which  might  come 


104  PURCHASING 

under  an  incomplete  description,  which  means  that 
information  would  be.  requested  as  to  which  was  re- 
quired, and  consequently  delay  would  occur. 

Some  orders  are  sent  out  with  an  attachment  for 
acknowledgment,  but  this  is  not  recommended.  It  is 
treated  in  a  very  perfunctory  manner.  It  is  probably 
better  to  enclose  a  post-card  (see  Figure  27),  as  this 
scheme  gets  more  recognition  and  can  be  used  to 
obtain  a  promised  date  of  shipment.  Another  good 
purpose  served  is  that  the  post-card,  being  the  same 
size  as  tickler  card,  can  be  filed  with  it  in  the 
follow-up  file.  The  whole  story  of  acknowledg- 
ment and  promises  regarding  the  order  are  then  kept 
together. 

Several  copies  of  the  order  have  to  be  made.  Some 
use  a  card  for  the  copy  to  be  kept  in  the  purchasing 
office,  but  if  the  card  is  stiff  it  does  not  give  satis- 
faction in  the  typewriter  and  a  good  impression  is 
not  obtained.  A  copy  is  usually  sent  to  the  depart- 
ment which  made  the  requisition,  sometimes  a  copy 
to  the  storekeeper,  and  sometimes  to  the  accountant, 
depending  on  the  methods  in  vogue.  The  printing  on 
all  copies  need  not  be  the  same,  but  they  should 
register  and  the  spacing  should  be  arranged  to  suit 
the  typewriter,  as  this  saves  considerable  time.  All 
copies  should  be  distinctive  as  to  color,  as  this  facili- 
tates distribution  and  prevents  any  mix  up. 

The  example  given  of  an  order  form  (Figure  25)  is 
numbered  in  the  right-hand  top  corner,  as  it  is  in- 
tended to  keep  the  office  copy  in  a  post  binder,  and 
in  this  position  the  number  is  more  readily  seen.  The 
numbering  should  be  done  when  printed  and  should 
be  in  large,  bold  figures.  A  few  extra  order  sheets 


THE  REQUISITION  AND  ORDER  105 

with  numbering  omitted  can  be  kept  on  hand  for 
use  in  replacing  spoiled  sheets  so  that  there  is  no 
break  in  the  numbering.  The  margin  on  the  left 
would  in  the  copies  be  blank  and  perforated  for 
binding.  If  it  is  not  desired  to  have  the  price  ap- 
pear on  any  of  the  copies,  it  can  be  omitted  by  in- 
serting a  slip  when  the  order  is  being  written,  or  using 
short  carbons. 

Before  mailing  the  order,  it  should  be  checked.  A 
stenographer  may  add  a  cipher  making  it  read  2000 
instead  of  200,  or  make  an  error  in  the  size  of  an  ar- 
ticle, the  consequences  of  which  might  be  serious  and 
involve  the  concern  in  heavy  financial  losses. 

Having  got  rid  of  the  original,  the  copies  can  be 
sent  out  to  the  departments  interested.  The  requisi- 
tion which  would  have  been  in  use  until  now,  can  be 
permanently  filed  away.  A  post  binder  is  best  for 
this  purpose;  it  enables  a  large  number  of  them  to  be 
kept  in  compact  form  and  easy  reference  can  be 
made  to  them  at  any  time.  The  order  number  should 
be  inserted  on  the  requisition  and  the  requisition 
number  on  order.  The  copy  of  order  remaining  in 
the  purchasing  department  should  be  filed  in  a  similar 
way,  but  it  will  be  temporarily  placed  in  the  "live" 
file  of  uncompleted  orders  and  later  transferred  to 
the  permanent  file  when  complete  deliveries  have 
been  made. 

Immediately  the  order  is  sent  out,  the  purchase 
order  record  must  be  posted  from  it,  also  the  record 
of  past  purchases  and  prices.  Both  of  these  opera- 
tions have  been  described  in  a  previous  chapter  and 
illustrations  given  of  some  forms  suitable  for  the 
purpose. 


106  PURCHASING 

Following  up  Orders 

If  an  order  has  been  placed  under  the  most  favor- 
able conditions  as  to  price,  terms,  and  date  of  ship- 


$ 

1 

JOHN  DOE  &  COMPANY 

360  CANNON  ST.,  NEW  YORK  CITY 

Date                          Req  No              Purchase  Order 

NO.  3047 

1 

6 

Address 

o    t-> 

•l-s 

Please  ship  to    ,      , 

>  s 

£  * 

Shipment  to  be  made                               via 

chase  Order  Number  must  appear  on  Shipping  Receipt, 
or  any  communication  connected  with  thi 

TEEMS 

PRICE 

1 

Purchasing  A 

,gent. 

FIGURE  No.  25. — Form  of  order. 


THE  REQUISITION  AND  ORDER  107 

ment,  still  the  whole  economic  value  of  the  purchasing 
department  might  be  lost  if  the  goods  were  not  de- 
livered on  time.  If  they  were  for  a  factory,  it  might 


JOHN  DOE  &  COMPANY 
360  CANNON  STREET 
NEW  YORK 

PATE 

PURCHASE 

RF,Q  No 

ORDER  No* 

To 

PLEASE  SEND  us  THE  UNDERMENTIONED  GOODS  : 


Shipment  to  be  made vii 


Acknowledge  receipt  of  this  order  stating  whether  you  can  ship  on  date 
named. 


IMPORTANT 

Invoices  must  be  rendered 

in  duplicate  and  bear 

above  order  No. 


Purchasing  Agent. 
FIGURE  No.  26.— Form  of  order  as  a  substitute  to  Figure  No.  25. 


108  PURCHASING 

have  to  work  overtime  to  complete  a  contract  or 
perhaps  lose  it  altogether,  and  in  construction  work 
the  non-arrival  of  material  of  only  one  class  might 
delay  the  work  of  every  class  of  mechanics.  It  is 
very  important  therefore  that  this  phase  of  the  work 
receives  close  attention.  There  are  many  schemes 
in  vogue  for  taking  care  of  it.  A  good  one  is  given 
here  and  suggestions  regarding  others.  A  tickler 
system,  to  be  efficient  in  securing  results,  must  be 
prosecuted  with  energy.  It  comes  into  being  with 
the  placing  of  an  order,  has  a  short  and  vigorous  life, 
and  dies  when  shipments  on  order  are  completed. 


DATE. 


This  acknowledges  receipt  of  your  Purchase  Order  No.- 

Dated For 

Shipment  will  be  made 


SIGNED- 


FIGURE  No.  27. — Post-card  to  be  enclosed  with  order  to  secure  an 
acknowledgment.  Size  4x6  inches. 

Tickler  Systems 

Many  concerns  send  out  with  the  order  some  form 
of  acknowledgment  which  usual) y  contains  a  space 
in  which  a  promise  can  be  inserted  regarding  ship- 
ment as  already  suggested  (see  Figure  27).  It  may 
be  advisable  in  some  cases  to  send  a  copy  of  the  order 
with  the  original  and  have  an  acceptance  indorsed 
on  its  face.  In  any  case  the  date  of  shipment  should 


THE  REQUISITION  AND  ORDER 


109 


be  recorded  on  the  tickler  card,  Figure  28.  This  card 
should  then  be  placed  in  the  tickler  file  under  the 
date  goods  should  be  shipped,  or  in  advance,  to  en- 
able a  clerk  to  send  a  notice  to  the  party  holding  the 
order.  The  date  should  be  noted  on  copy  of  order 
to  insure  locating  the  card  promptly. 

If  these  cards  are  kept  in  force,  no  shipment  dates 
can  be  overlooked,  because  they  come  up  automati- 
cally each  day.  Under  the  space  headed  "  nature  of 
tickler  "  or  "  promise  "  a  memorandum  should  be  made 


DATE  OF 
TICKLER 

NATURE  OF  TICKLER  OR  PROMISE 

DATE  OF 
PROMISE 

FIGURE  No.  28. — Tickler  card  for  following  up  orders.      Size  4x6  inches. 

of  each  inquiry  sent  out  regarding  the  order  and  each 
reply.  This  obviates  looking  up  correspondence. 
Some  purchasing  departments  keep  a  tickler  system 
by  using  thirty-one  pigeon  holes,  one  for  each  day 
in  the  month,  and  placing  the  cards  or  an  additional 
copy  of  the  order  in  them,  but  the  file  system  is  pref- 
erable. It  can  be  made  to  cover  as  many  months  as 
desired,  takes  up  less  space,  and  is  more  convenient. 
When  an  order  is  completed  the  card  is  of  no  further 
value  and  can  be  destroyed. 


110  PURCHASING 

Another  scheme  for.  a  tickler  system  is  to  have  an 
additional  copy  of  the  order  made  and  file  it  in  a  date 
file,  such  as  already  described,  sufficiently  in  advance 
of  the  actual  date  of  shipment  so  that  a  follow-up 
notice  can  be  sent  to  shipper  in  time  to  insure  its 
dispatch  on  the  specified  date.  This  extra  copy  need 
only  be  made  of  those  orders  on  which  a  follow-up  is 
necessary,  and  it  can  have  special  rulings  on  back  if 
desired  for  the  purpose  of  noting  promises  regarding 
shipments.  If  the  card  system  is  not  adopted  this 


To- 


GENTLEMEN, 

Our  records  show  that  you  have  our  Order  No.. 


Dated- Calling  for 

Please  advise  when  shipment  will  be  made  using  return  portion  of 
this  card. 

Yours  very  truly, 


DATE. 


FIGURE  No.  29. — Reply  post-card  to  obtain  promise  as  to  date  of  shipment. 

scheme  will  be  found  excellent;  it  dispenses  with  the 
work  of  making  out  the  tickler  card  and  all  informa- 
tion regarding  the  follow-up  is  self-contained  on  the 
copy  of  the  order  which  is  a  great  advantage  as  with 
the  card  system  there  is  sometimes  a  necessity  to  refer 
back  to  the  order. 

It  is  necessary  to  remind  the  seller  of  the  approach- 
ing date  of  shipment.  Some  orders  are  so  important 
that  inspectors  have  to  be  on  the  ground  and  report 
progress.  In  other  cases  a  strong  letter  from  the  pur- 
chasing agent  is  sufficient,  but  for  the  ordinary  run 
of  orders  a  printed  form  will  probably  answer  the 


THE  REQUISITION  AND  ORDER  111 

purpose.  It  can  be  simply  a  request  for  date  of 
shipment  or  worded  imperatively  as  occasion  de- 
mands. The  reply  post-card  scheme  brings  very  good 
results  (see  Figure  29),  and  an  advantage  connected 
with  this  is  that  the  reply  half  of  the  card  can  be  filed 
with  the  acknowledgment  card,  Figure  27,  and  the 
tickler  card,  Figure  28,  thus  keeping  all  cards  together 
pertaining  to  following  up  the  order. 

If  it  is  desired  to  send  out  a  printed  letter  form  of 
inquiry  regarding  shipment,  something  similar  to 
Figure  30  is  suggested.  This  would  answer  the  pur- 
pose for  those  concerns  who  object  to  the  use  of  post- 
cards. If  a  form  similar  to  this  is  used  it  can  be 
done  in  conjunction  with  the  scheme  outlined  above 
for  using  a  copy  of  the  order  for  the  tickler  system. 
By  having  the  form  shown  in  Figure  30  the  same 
size  as  the  order  it  can  be  filed  with  it  which  is  a 
great  advantage. 

Recording  Shipments 

There  are  innumerable  schemes  for  recording  ship- 
ments made  against  an  order.  The  best  for  any  par- 
ticular case  will  largely  depend  on  the  nature  of  the 
orders  themselves.  If  they  are  mainly  for  articles 
which  will  be  dispatched  in  one  shipment,  it  is  easy 
to  arrange  the  copy  of  the  order,  which  remains  in 
the  purchasing  agent's  office,  with  a  space  on  the  face 
of  it  which  can  be  used  for  recording  the  shipment. 
But  where  the  orders  are  mostly  for  large  quantities 
and  the  execution  of  them  involves  many  shipments, 
the  back  of  the  copy  of  the  order  can  be  ruled  for 
keeping  the  record  (see  Figure  35  in  next  chapter). 
It  is  of  great  importance  to  obtain  prompt  advice 


112  PURCHASING 

of  these  shipments  and  have  the  traffic  man  follow 
them  up,  particularly  in  those  cases  where  a  manufac- 
turing establishment  is  not  carrying  a  heavy  stock  of 
raw  material,  but  working  on  a  very  close  margin. 

JOHN  DOE  &  COMPANY 

360  CANNON  ST. 

NEW  YORK  CITY 

—19 

To 


Please  advise  us  immediately  when  you  will  make  shipment  of  our 

order  No dated using  space  below  for  reply. 

•  Yours  truly, 


Purchasing  Agent. 


NOTE. — If  whole  or  partial  shipment  has  been  made  give  particulars  of  same. 


DATE. 


The  material  referred  to  on  above  order  will  be  shipped  on. 

f  rom via 

REMARKS  : 


Shipper. 

FIGURE  No.  30. — Request  for  information  as  to  shipment  of  an  order. 
Size  should  be  the  same  as  the  copy  of  order  with  which  this  will  be 
filed. 


THE  REQUISITION  AND  ORDER  113 

In  these  cases  the  supplies  must  come  in  regularly 
and  promptly.  There  are  also  certain  raw  materials 
which  from  their  nature  cannot  be  carried  in  stock  any 
great  length  of  time,  and  frequent  and  regular  de- 
liveries are  necessary.  When  the  information  regard- 
ing a  shipment  has  been  properly  recorded  in  the 
purchasing  office,  the  advice  or  a  notification  of  it 
should  be  turned  over  to  the  traffic  man  and  to  the 
storekeeper  or  receiving  clerk  to  enable  them  to  take 
care  of  their  duties  in  expediting  delivery  and  in  re- 
ceiving and  arranging  storage.  Frequently  the  ship- 
ping advice,  invoice,  and  bill  of  lading  will  all  come  in 
together. 

After  all  material  has  been  received  as  called  for  on 
vthe  order,  and  the  invoices  have  been  checked  against 
it,  it  should  be  withdrawn  from  the  "live"  file  and 
placed  in  the  completed  or  "dead"  file.  The  orders 
can  be  kept  indefinitely  for  reference  at  any  time  and 
owing  to  the  manner  of  filing  them  very  little  space  is 
required  to  store  several  thousands  with  their  accom- 
panying requisitions  and  other  records  connected  with 
them. 

The  method  outlined  will  fit  with  modifications  a 
great  diversity  of  businesses  whose  activities  are 
widely  different.  There  are  some,  however,  in  which 
the  procedure  would  have  to  be  varied  from  that 
described.  Take  for  instance  a  concern  which  issued 
comparatively  few  orders,  but  each  order  involved 
considerable  correspondence  and  there  was  a  large 
accumulation  of  papers  in  connection  with  each  one. 
In  such  a  case  it  would  not  be  advisable  to  scatter  the 
correspondence  and  reports  through  the  general  file, 
but  all  of  the  documents  connected  with  the  order 


114  PURCHASING 

should  be  collected  in  a  folder,  including  copy  of  order, 
comparison  of  quotations,  etc.  It  would  be  found 
that  reference  to  such  papers  would  be  much  easier 
if  kept  in  this  way. 

Emergency  Orders 

Even  in  the  best  regulated  establishments  there  will 
be  occasions  when  orders  have  to  be  given  for  material 
and  supplies  without  going  through  all  the  various 
procedures  usually  regarded  as  necessary  and  prudent 
and  which  are  outlined  in  this  chapter.  No  amount 
of  foresight  on  the  part  of  the  purchasing  agent  is 
a  protection  against  a  lapse  by  a  member  of  some 
other  department  to  remember  something.  A  break- 
down in  the  shop  or  an  accident  to,  or  failure  of  some 
material  being  fabricated  may  be  the  occasion  of 
rush  orders.  If  there  is  no  time  to  obtain  quota- 
tions a  well  organized  purchasing  office  can  confi- 
dently issue  an  order,  knowing  that  the  complete  and 
authentic  records  which  are  in  the  office  will  enable 
the  clerk  who  checks  the  invoice  to  do  so  intelligently 
and  not  approve  it  unless  a  fair  price  is  charged. 

In  such  cases  as  cited  in  last  paragraph  it  is  the 
practice  of  some  purchasing  agents  to  send  a  form 
letter  to  the  party  with  whom  the  order  is  placed 
asking  them  to  name  the  price.  On  receipt  of  this 
the  regular  official  order  is  issued.  This  enables  the 
order  clerk  to  insert  the  price  on  every  order  issued, 
which  is  a  regulation  strictly  adhered  to  hi  some 
offices.  Probably,  however,  the  material  would  be 
shipped  before  price  was  received  and  it  is  no  protec- 
tion against  an  excessive  price  being  charged.  There 
are  some  purchasing  offices  who  from  the  very  nature 


THE  REQUISITION  AND  ORDER  115 

of  the  business  must  issue  a  great  many  such  orders 
daily,  and  in  those  cases  dependence  must  be  placed 
on  the  records  of  prices  kept  in  the  offices  to  secure 
fair  and  just  treatment.  This  emphasizes  the  im- 
portance of  keeping  all  information  and  data  in  good 
shape  and  up  to  date. 


CHAPTER  X 
INVOICES  AND  METHODS  OF  HANDLING 

General  Considerations 

THE  work  in  connection  with  invoices  ranks  with 
the  most  important  operations  of  the  depart- 
ment. The  order  may  have  been  placed  to  the  very 
best  advantage  as  regards  quality,  price,  delivery,  and 
terms,  but  all  of  these  benefits  may  be  lost  if  the 
invoices  are  not  dealt  with  in  such  a  manner  as  to 
insure  their  being  permanently  secured.  This  is 
done  by  careful  and  prompt  checking.  Careless  check- 
ing might  mean  that  prices  were  approved  in  excess  of 
those  stated  on  the  order,  and  delay  in  handling  the 
invoice  might  cause  the  loss  of  cash  discount,  and  in 
addition  the  loss  of  indirect  and  contingent  advantages 
which  accrue  from  the  prompt  approval  and  payment 
of  invoices. 

It  is  the  custom  of  some  offices  to  insist  on  the 
use  of  uniform  invoice  forms.  These  are  sent  out 
with  the  purchase  order,  and  the  order  itself  con- 
tains a  clause  to  the  effect  that  they  must  be  used 
when  invoices  are  rendered.  It  is  a  proceeding  which 
has  been  milch  criticized,  and  great  difficulty  has  been 
experienced  in  getting  it  adopted.  All  the  advantages 
of  such  a  scheme  are  on  the  side  of  the  buyer.  To 
the  vendor  it  is  a  source  of  trouble  and  annoyance 
and  interferes  with  his  accounting  methods.  To  a 
limited  extent  all  business  houses  get  a  certain  amount 


INVOICES  AND  METHODS  OF  HANDLING      117 

of  advertising  from  their  stationery  and  are  recognized 
impersonally  from  it.  There  is  no  individuality  for 
the  vendor  in  the  uniform  invoice,  and  unless  it  can 
be  brought  into  universal  use  it  will  be  very  unpopular 
with  some  houses. 

To  any  person  unaccustomed  to  the  handling  and 
paying  of  invoices  it  might  seem  inconceivable  that 
any  large  establishment  with  an  up-to-date  account- 
ing system  could  pay  an  invoice  twice.  Yet  this  is 
an  occurrence  of  more  or  less  frequency  with  both 
large  and  small  businesses,  and  will  probably  never 
be  entirely  overcome  while  the  human  element  is  a 
factor  in  dealing  with  the  invoices.  If  the  method 
outlined  here  is  followed,  it  should  be  impossible  for 
duplicate  invoices  or  invoices  covering  the  same  ma- 
terial to  be  approved  twice.  If  it  was  just  a  ques- 
tion of  duplicate  invoices,  that  is  invoices  bearing  same 
date,  for  the  same  material  and  the  same  amount, 
the  matter  would  be  simplified  because  these  are  more 
easily  detected.  But  there  are  other  complications, 
such  as  two  invoices  being  rendered  for  the  same 
material  but  inadvertently  bearing  different  dates; 
also  where,  say  a  party  has  an  order  for  120  articles 
with  instructions  to  ship  twenty  by  express  and  bal- 
ance by  freight.  The  twenty  are  supplied  and  invoice 
mailed,  the  balance  of  100  may  be  shipped  by  freight 
the  same  or  next  day  and  another  invoice  rendered, 
this  time  for  the  full  quantity  of  120.  There  are  several 
other  ways  in  which  invoices  can  be  made  out  im- 
properly but  inadvertently  and  containing  charges  for 
material  and  supplies,  not  actually  shipped.  But  these 
illustrations  will  suffice  to  show  that  it  is  entirely  the 
province  of  the  purchasing  department  to  prevent 


118  PURCHASING 

approval  of  them,  for  if  they  once  get  through  there 
they  will  probably  be  paid.  An  accounting  depart- 
ment vouching  many  thousands  of  invoices  each 
month  will  look  to  the  purchasing  department  for 
protection  against  such  errors  as  cited,  therefore,  the 
safeguards  must  be  foolproof.  In  small  offices  where 
proper  precautions  are  not  taken  invoices  frequently 
get  through  and  duplicate  payments  are  made.  Han- 
dling the  smaller  quantity  makes  no  difference  in  this 
respect  for  the  bookkeeper  receives  the  invoices  daily 
and  probably  posts  them  in  his  ledger  without  con- 
sidering the  order  of  date.  At  the  end  of  the  month 
he  may  make  out  a  pay  statement  of  the  invoices 
for  which  check  is  to  be  sent  and  does  not  perceive 
that  he  has  two  similar  amounts  of  the  same  date. 

Many  purchasing  offices  do  not  keep  a  register  of 
invoices  as  it  is  looked  upon  as  an  unnecessary  ad- 
dition to  the  work  with  no  compensating  advantages. 
In  some  cases,  however,  it  is  indispensable,  particu- 
larly where  invoices  have  to  be  sent  out  of  the  office 
to  some  other  department  for  approval.  If  a  record 
is  not  made  and  the  invoice  cannot  be  traced,  it  may 
be  side-tracked  and  payment  delayed.  The  seller  is 
entitled  to  his  money  in  accordance  with  the  terms 
of  the  contract,  and  the  purchasing  department  must 
do  its  part  in  the  routine  work  by  passing  his  invoice 
promptly.  Where  a  cash  discount  has  been  arranged, 
it  is  important  to  see  that  the  invoice  is  passed 
through  for  payment  before  the  expiration  of  the  time 
the  discount  is  available.  Where  the  purchases  are 
large  and  are  of  a  nature  in  which  cash  discounts 
are  customary  or  have  been  agreed  upon,  it  is  very 
expedient  that  the  fullest  advantage  should  be  taken 


INVOICES  AND   METHODS   OF  HANDLING      119 

of  the  arrangement  and  the  economic  benefits  secured. 
During  the  course  of  a  year  the  amount  saved  by 
discounting  invoices  will  be  considerable,  in  addition 
to  which  it  adds  to  the  reputation  of  the  concern  and 
puts  more  power  into  the  purchasing  agent 's  hands 
when  buying.  Any  business  house  will  give  pref- 
erence to  and  favor  relations  with  buyers  from  whom 
prompt  settlements  can  be  positively  relied  upon. 

In  some  cases  it  is  the  practice  for  the  accountants 
to  receive  the  invoices  and  check  them  against  ma- 
terial received  and  in  all  other  respects,  with  the  ex- 
ception of  price,  which  is  checked  in  the  purchasing 
department.  It  is  a  matter  of  the  most  suitable  ar- 
rangement for  the  smooth  and  economical  operation  of 
the  whole  establishment,  but  it  certainly  should  be  up 
to  the  man  who  buys  the  material  to  certify  that  the 
price  is  correct  and  the  quality  right.  Whatever  course 
the  invoices  take  in  passing  through  the  various 
stages  of  certification,  these  two  things  distinctly  be- 
long to  the  purchasing  department.  It  is  the  opinion 
of  many  that  the  department  should  be  made  entirely 
responsible  for  the  invoice  up  to  the  last  stage  when 
it  is  vouched  for  payment.  This,  however,  is  not 
feasible  in  large  establishments  where  the  ramifica- 
tions of  the  work  of  the  accounting  department  cover 
the  bookkeeping  functions  of  stores  and  production 
costs  with  which  invoices  are  closely  allied  or  inter- 
related. 

Recording  Invoices 

In  every  case,  irrespective  of  the  nature  or  magni- 
tude of  the  business,  the  invoice  should  go  in  the 
first  place  to  the  purchasing  department  and  a  record 


120 


PURCHASING 


o! 

& 

t  H 
•  H 

">« 

RECEIVED 

a 

'S 
g 

IS 

.s 

H 

«a 
O 

| 

§ 
CS 

• 
H 

Q 

1 

SENT  TO 
ACCOUNTANT 

"6 

•   '     '  •                I 
i 

T3 

DATE 
RETURNED 

O> 

'       .       .      '-                                  1 

SH 
11 

P02 

T3 

SENT  TO 
DEP'T  No. 

S 

CD 
O 

*O 

RECEIVED 

g 

7 

rH 
CO 

1    e 

o 

fe 

3        5 

2    1 

o 

I 

fe 

INVOICES  AND  METHODS  OF  HANDLING      121 

be  made  of  it  on  some  method  similar  to  that  shown 
in  Figure  31.  This  is  a  loose  leaf  ledger  arrangement, 
and  the  pages  can  be  as  wide  as  occasion  demands, 
repeating  the  ruling  as  necessary.  When  the  in- 
voices are  listed  in  this  record,  a  watch  should  be 
kept  to  detect  duplicates,  and  if  any  are  discovered 
bearing  the  same  date  and  for  the  same  amount,  an 
investigation  should  be  made,  for  this  is  the  first 
test  the  invoice  passes  through  and  improper  or  irregu- 
lar ones  should  be  immediately  suppressed. 

Preliminary  Work 

After  recording  the  invoice  the  first  thing  neces- 
sary is  to  scrutinize  the  date  when  payment  will  be 
due  to  secure  the  cash  discount  and  an  effective 
method  adopted  of  keeping  this  date  prominently  before 
all  persons  with  whom  the  invoice  comes  in  contact. 
It  is  customary  in  some  offices  to  paste  a  small  sticker, 
similar  to  Figure  32,  on  the  invoice,  calling  attention 
to  the  date  the  invoice  must  be  paid  to  make  the  dis- 

DISCOUNT  EXPIRES 


DATE 


FIGURE   No.  32. — Attachment  for  invoices  to   indicate  date   on  which 
discount  expires.      Size  about  2x2  inches. 


122 


PURCHASING 


count  available.  This  should  be  preferably  a  striking 
color  which  can  be  readily  seen,  and  serves  to  call  the 
attention  of  everybody  who  handles  the  invoice  to 
the  fact  that  it  must  be  through  by  the  specified 
date. 

It  is  also  necessary  to  adopt  some  uniform  method 
of  providing  space  for  certifying  the  invoice.  If  there 
was  room  on  the  face  of  every  invoice  a  rubber  stamp 
would  answer  the  purpose,  but  this  can  be  done  only 
with  a  limited  number.  In  small  offices  the  practice 


DATE 


FROM 


PURCHASE 
ORDER  No. 


QUANTITY 


DESCRIPTION  OF  MATERIAL 


QUANTITY- 
QUALITY— 
PRICE 


EXTENSIONS- 
F.O.B 


FREIGHT- 


CLASSIFICATION 


AMOUNT 


APPROVED- 


FIGURE  No.  33. — A  form  similar  to  this  can  be  attached  to  each  invoice 
to  insure  proper  certification.  No  invoice  should  be  vouched  for 
payment  until  this  form  has  been  properly  initialed  in  each  space  by 
the  persons  checking  invoice.  Size  about  5x5  inches. 


INVOICES  AND  METHODS  OF  HANDLING      123 

of  rubber  stamping  the  invoices  on  the  back  is  re- 
sorted to  and  answers  admirably,  but  in  large  estab- 
lishments this  is  not  feasible.  It  is  impracticable 
to  turn  every  invoice  over  to  examine  its  many  certi- 
fications, and  when  they  are  in  voucher  form  the  audi- 
tors must  be  able  to  get  at  these  features  clearly  and 
quickly. 

A  form  is  shown,  Figure  33,  which  can  be  pasted 
along  one  edge  and  affixed  to  the  invoice  without 
obliterating  any  part  of  it.  Sufficient  information 
is  written  on  this  to  identify  it  completely  with  the 
invoice,  and  spaces  can  be  arranged  on  it  for  all  the 
signatures  required  by  the  auditing  system  of  the 
company. 

A  much  smaller  form  can  be  used,  similar  to  Figure 
34,  and  this  may  answer  the  purpose  of  some  small 
accounting  systems.  It  has  one  great  objection  in 
that  it  is  not  positively  identified  with  the  invoice. 
One  of  these  forms  could  be  detached  from  an  invoice 

INVOICE  CHECKED 


FOR 


GOODS  REC'D 

QUALITY 

PRICE 

EXTENSIONS 

CHARGE  TO 

APPROVED 


BY 


FIGURE  No.  34.  —  An  alternate  to  Figure  No.  33  to  be  used  in  checking 
and  approving  invoices.     Size  about  2x3  inches. 


124  PURCHASING 

for  50  cents  and  attached  to  one  for  $1000  without 
detection.  As  a  measure  of  protection,  where  in- 
voices are  handled  by  several  people,  no  claims  can 
be  made  for  it  and  it  should  only  be  used  where  the 
clerical  work  on  it  is  done  by  one  man. 

Checking  Invoices  With  Order 

In  all  properly  organized  systems  the  checking  of 
invoices  follows  a  well-defined  and  consistent  course, 
which  should  be  well  planned,  avoiding  laboriousness 
and  undue  delays.  The  invoice  should  be  checked 
against  the  order  to  see  whether  it  corresponds  with 
the  price  and  terms  stated,  and  should  be  recorded 
on  the  order  itself.  This  procedure  should  entirely 
eliminate  any  possibility  of  the  material  or  any  part 
of  it  being  paid  for  twice.  If  the  instance  already 
quoted  is  taken,  of  an  order  which  was  placed  for  120 
articles,  twenty  to  be  shipped  by  express  and  100  by 
freight,  it  will  readily  be  seen  that  when  the  invoice 
for  120  articles  came  in  and  the  clerk  went  to  record 
it  on  the  copy  of  the  order  he  would  find  that  an  in- 
voice for  twenty  had  already  been  passed  and  imme- 
diately detect  the  error. 

This  method  of  entering  invoices  on  the  copy  of  the 
order  itself  is  a  check  against  over  shipments.  An 
order  may  be  placed  for  5000  pieces  of  goods  or  ar- 
ticles which  are  to  be  shipped  in  comparatively  small 
lots,  and  unless  a  record  is  kept  the  supplier  might 
continue  shipping  indefinitely  if  it  suited  his  purpose 
long  after  the  5000  were  actually  delivered. 

Figure  35  shows  a  scheme  for  ruling  the  reverse 
side  of  the  copy  of  order  kept  in  the  office  and  an 
entry  of  all  shipments  and  all  invoices  should  be 


INVOICES  AND  METHODS  OF  HANDLING      125 

made  here,  or  if  the  order  is  one  which  involves  only 
one  shipment  and  one  invoice  it  can  be  recorded  on 
the  face  of  the  order.  The  majority  of  orders  sent  out 
by  many  purchasing  offices  are  probably  filled  in  one 
shipment,  and  the  ruling  on  back  of  the  order,  would  be 
used  at  rare  intervals.  In  a  case  where  a  very  large 
number  of  shipments  are  made  on  an  order,  additional 
sheets  printed  similar  to  Figure  35  can  be  inserted 
in  the  binder  with  the  copy  of  order,  and  should  be 
given  the  same  number  for  purposes  of  identification. 
In  checking  and  comparing  the  invoice  with  order 
not  only  the  price  and  terms  are  checked,  but  it 


SHIPMENTS 

INVOICES 

REMARKS 

DATE 

QUANTITY 

VIA 

DATE 

QUANTITY 

AMOUNT 

0 

0 

0 

FIGURE  No.  35. —  Reverse  side  of  copy  of  order  which  is  kept  in  pur- 
chasing agent's  office.  This  is  used  for  recording  shipments  and 
invoices  made  against  the  order. 


126  PURCHASING 

should  be  seen  that  the  description  corresponds,  that 
the  size  and  weight  are  correct,  also  the  quality 
specified.  In  cases  where  the  material  is  subject  to 
inspection  before  delivery  the  inspection  reports  must 
be  referred  to,  to  see  if  it  complies  with  the  speci- 
fication and  has  passed  a  satisfactory  test.  There 
are  various  forms  of  inspection  reports  and  some  of 
them  may  come  from  one  of  the  firms  of  inspecting 
engineers  engaged  for  the  work.  If  the  reports  are 
made  by  men  in  the  employ  of  the  establishment  a 
form  similar  to  Figure  36  can  be  used.  When  com- 
pletely checked  with  the  order  a  distinctive  check 

COPIES  TO 


INSPECTION 
REPORT 

JOHN  DOE  &  COMPANY 

360  CANNON  ST. 
NEW  YORK  CITY 

MATERIAL 

PURCHASED  FROM 

INSPECTED  BY  , 

AT 

DATE  INSPECTED 

DATE  REPOHT  PF-NT 

TIM 

TJ'FPn'RT  APPROVED  BY 

DATE  OF  APppnvAT' 

NATURE  OF  INSPECTION  AND  TESTS 


FIGURE    No.    36.  —  Inspection  report.      If  the  original  does  not    go   to 
the  purchasing  department  a  copy  should  always  be  sent  there. 


INVOICES  AND  METHODS  OF  HANDLING      127 

mark  should  be  made  on  the  invoice  to  show  it  has 
been  done. 

Checking  Invoices  With  Material  Received 

The  checking  of  invoice  with  material  received  is 
the  third  preventive  against  approving  invoices  twice 
for  the  same  material,  and  should  be  just  as  sure  in 
its  operation  as  the  check  against  the  order.  There  is 
always  some  method  of  recording  the  receipt  of  ma- 
terial and  Figure  37  shows  a  sheet  which  can  be  used 
by  the  receiving  clerk,  storekeeper,  or  whoever  re- 
ceives the  material  and  makes  the  record.  It  can  be 
seen  that  when  an  invoice  is  checked  with  the  material 
received  and  initialed  by  the  person  doing  so,  it 
should  be  impossible  for  this  operation  to  be  repeated 
for  the  same  material.  This  form,  Figure  37,  is  a 
duplicate  of  the  one  kept  by  the  storekeeper  with  the 
exception  of  the  last  column.  The  copy  going  to 
purchasing  or  accounting  department  is  arranged  for 
checking  invoices,  and  the  storekeeper's  copy  for  his 
perpetual  inventory  record.  In  some  establishments 
the  receiving  clerk  or  storekeeper  has  to  sign  the  in- 
voice, but  it  involves  additional  traveling  around  for 
the  invoice  and  loss  of  time.  Invoices  seem  peculiarly 
liable  to  get  lost  and  mislaid,  and  the  elimination  of 
any  possibilities  in  this  direction  is  desirable. 

In  some  establishments  the  purchasing  department 
has  nothing  to  do  with  checking  the  invoice  with  ma- 
terial received,  this  work  being  done  in  the  account- 
ant's office.  The  organization  of  the  work  of  the 
various  departments  should  govern  this.  If  the  stores 
are  entirely  separate  from  the  purchasing,  it  would 
probably  be  done  in  this  way. 


128 


PURCHASING 


BECKED 
WITH 
NVOICE 

s! 

O 

S2 

h 

m 

1  g 

Q 

1 

C 

I 

i 
I 

3 

1! 

d.      2 

1 

P 

H 

2. 

CQ 

8  a 

11 

§  g 

0 

si 

| 

jil 

§ 

o 

° 

H  bo 

H 

*S     rt 

ffl 
r/D 

E 

«     « 

Q 

b 

a 

o  | 

g 

„, 

•s  -5 

* 

^ 

^      *4M 

1 

II 

§ 

i 

'"2 

S 

1 

•2  j 

Q 

^? 

O       CH 

g 

11 

s 

if 

PURCHASE 
ORDER  No. 

il 

O         O 


INVOICES  AND  METHODS  OF  HANDLING      129 

A  scheme  adopted  with  success  in  some  plants  is 
for  the  receiving  clerk  to  list  the  articles  or  material 
received  on  the  reverse  side  of  his  copy  of  the  order 
which  is  ruled  specially  for  that  purpose.  This  is  then 
attached  to  the  invoice  and  serves  the  same  purpose 
as  the  form  shown  in  Figure  33.  This  method  has 
one  great  drawback  which  is  that  orders  having  many 
shipments  and  invoices  rendered  against  them  must 
have  supplementary  forms  for  approval  of  all  in- 
voices before  the  final  one  to  which  copy  of  order  is 
attached. 

Checking  Prices 

There  are  always  some  orders  sent  out  on  which 
the  price  is  not  quoted,  and  the  invoices  received 
against  these  must  be  carefully  checked  to  see  that 
price  charged  is  correct.  The  order  may  have  been 
a  confirming  one  to  cover  an  emergency  purchase  and 
no  price  arranged.  It  must  be  examined  therefore  and 
if  the  price  charged  is  not  a  fair  one  it  should  be  taken 
up  with  the  suppliers.  In  doing  this  and  in  going 
through  the  invoices  for  errors  in  prices,  changes  in 
list  or  net  prices,  also  in  discounts,  must  be  noted  and 
recorded  on  the  price  cards. 

Emergency  orders  are  probably  issued  by  every 
purchasing  department.  This  is  done  by  telephone  or 
letter  and  sometimes  the  official  order  is  not  mailed 
until  a  price  has  been  fixed.  This  is  to  enable  the 
price  to  appear  on  every  order,  but  it  is  doubtful 
whether  any  better  prices  are  obtained  than  those  se- 
cured by  a  good  man  checking  the  prices  on  invoices 
rendered  against  such  emergency  orders.  There  are 
some  establishments  where  the  character  of  the  business 


130  PURCHASING 

necessitates  the  issuance  of  a  large  number  of  these 
orders  daily,  and  the  holding  back  of  the  regular 
official  order  until  a  price  were  arranged  would  lead 
to  endless  confusion. 

Checking  Freight  Charges 

If  there  are  any  freight  charges  or  freight  allow- 
ances in  connection  with  the  invoice,  the  traffic  man 
must  check  and  approve  these.  It  is  quite  customary 
for  the  shipper  to  sell  his  product  f.o.b.  the  shipping 
point,  but  with  freight  allowed  to  a  competitive  point 
or  to  destination.  These  charges  are  sometimes  paid 

NOTICE  OF  FREIGHT  CHARGES  PAID 


There  has  been  paid  by. 


$ For  freight  charges  on. 

Shipped  by 


From Car  Nos.- 


Purchase  Order  No Reads  F.  O.  B.. 

This  freight  should  be  charged  back  to  shippers. 
Date 


FIGURE  No.  38. — Notice  regarding  freight  charges.     Size  5x8  inches. 

by  consignee,  and  in  other  cases  an  allowance  is  made 
on  the  invoice.  If  the  consignee's  factory  is  located, 
or  material  received,  at  some  distance  from  head  office, 
an  advice  should  be  sent  to  the  purchasing  office  of  any 
freight  paid  to  enable  the  traffic  man  to  check  it 
and  see  that  the  proper  credit  is  obtained.  Figure  38 
indicates  a  form  of  advice  to  accountant  regarding 


INVOICES  AND  METHODS  OF  HANDLING      131 

this.  If  the  invoice  has  already  gone  through  there 
should  have  been  a  notation  on  it  about  the  freight 
allowance,  and  this  advice  will  be  a  confirmation  of 
it.  Express  charges  are  another  thing  which  should 
be  closely  watched.  When  delay  has  occurred  in  mak- 
ing shipment  and  urgent  calls  are  sent  for  the  material, 
a  shipper  will  frequently  send  it  by  express,  but  omit 
to  pay  charges.  If  the  delay  is  the  fault  of  the  con- 
signor he  should  be  debited  with  the  charges,  or  the 
difference  between  freight  and  express  charges. 

Checking  Extensions 

The  checking  of  extensions  is  done  more  often  by 
the  accounting  office  than  by  the  purchasing  depart- 
ment, and  when  it  falls  to  the  latter  to  take  care  of  it 
the  work  must  be  designated  to  some  person  who 
is  familiar  with  trade  discounts  as  these  appear  very 
frequently. 

Classification 

The  classification  of  an  invoice  or  the  allocating  of 
the  amount  among  several  accounts  will  also  probably 
be  done  by  accountants,  but  if  done  in  the  purchasing 
office  it  must  be  seen  that  it  appears  on  the  slip  in 
the  space  shown  in  Figure  33  or  Figure  34,  whichever 
is  used. 

Approval 

The  approval  of  the  invoice  as  far  as  it  concerns  the 
purchasing  department  may  be  covered  by  the  various 
checks  it  has  already  had,  each  of  which  will  have 
been  initialed  by  the  clerk  who  handled  it  at  the  time. 
The  final  approval  required  by  the  auditor  will  prob- 


132  PURCHASING 

ably  be  the  accountant's  to  certify  that  the  proper 
charges  or  credits  have  been  made  to  the  factory 
accounts.  Its  final  exit  from  the  purchasing  depart- 
ment should  be  recorded  on  the  form  on  which  it 
was  first  entered  (see  Figure  31). 


CHAPTER  XI 

OPERATION  OF  STORES 

General  Remarks 

THE  operation  of  the  storeroom  may  or  may  not 
come  under  the  jurisdiction  of  the  purchasing 
agent,  but  whether  it  does  or  not,  the  receipt  and  con- 
trol of  raw  material  and  supplies  are  so  closely  allied 
to  the  purchasing  department,  that  some  description 
of  the  duties  pertaining  to  the  work  and  the  course 
taken  by  the  material  until  its  final  consumption  or 
disposition  is  necessary  to  complete  the  object  of 
this  book. 

If  the  purchasing  agent  is  held  responsible  for  pur- 
chases to  keep  a  manufacturing  plant  running,  it 
does  not  seem  right  that  he  should  have  no  voice  in 
the  maintenance  of  stock,  and,  in  conjunction  with 
the  heads  of  departments  interested,  a  voice  in  deter- 
mining the  maximum  and  minimum  quantities  kept 
on  hand.  For  on  the  latter  depends  quite  often  the 
price  to  be  paid. 

There  are  always  losses  in  producing  anything  in 
each  stage  of  its  development.  There  is  a  loss  in  the 
labor  item  from  "  soldiering "  or  some  other  cause, 
and  there  is  a  loss  in  material  from  waste,  pilfering, 
etc.  It  is  the  mission  of  the  stores  department  to  pre- 
vent this.  A  loosely  kept  storeroom  without  a  proper 
system,  is  one  of  the  most  fruitful  causes  of  losses, 
but  it  can  be  eradicated  altogether,  or  reduced  to  an 


134  PURCHASING 

imperceptible  minimum  by  the  receipt,  control,  and 
delivery  of  all  material  used  through  a  well  organized 
and  systematized  stores  system.  There  are  four  points 
to  consider: 

1.  The  receipt  of  materials  and  supplies  into  stores 
and  their  accurate  recording. 

2.  The  storing  in  convenient  and  safe  places  and 
receptacles. 

3.  The  delivering  of  the  right  materials  to  the  right 
persons. 

4.  The  keeping  of  an  account  of  the  stores  in  an 
accurate  and  efficient  manner. 

Receiving  Materials  and  Supplies 

In  some  establishments  the  storekeeper  receives  all 
materials,  but  in  the  larger  ones  there  will  be  a  re- 
ceiving clerk,  whose  duties  will  be  to  receive  and 
receipt  for  all  articles  coming  into  the  establishment 
and  deliver  them  to  the  stores  and  sometimes  directly 
to  the  department. 

He  should  not  receive  anything  unless  he  has  a  copy 
of  the  purchasing  agent's  order,  which  he  should  refer 
to  and  compare  with  the  arriving  material.  If  this  is 
not  done  he  is  liable  to  receive  goods  not  ordered,  or 
which  have  been  canceled,  thereby  getting  the  pur- 
chasing department  in  trouble  and  probably  causing 
loss  to  the  establishment.  Quantities  in  excess  of 
those  ordered  should  never  be  received  without  con- 
sulting with  the  purchasing  agent. 

The  receiving  clerk  will  probably  report  directly 
to  the  accounting  department,  sending  copies  of  his 
lists  of  materials  and  supplies  received  to  the  pur- 
chasing agent  and  storekeeper.  Whether  the  store- 


OPERATION  OF  STORES 


135 


ENT'D 
PERP'L 
INVEN'T 

si 
•i 

s 

\                                        "S^ 

a 

\                                                       s  fe 

| 

,\                                                                 8 

M 

•^  co 

o 

i 

ll 

fc 

o 

H 

.ff  « 

£ 

1 

^ 

o3     £Tfl 

p 

Sj 

-*^    VTH 

cc 

Q 

• 

02 

f  .fl 

««-«  a 

O     O 
p     ® 

.2  a 

1 

i 

P!  *o 

i 

OQ     -** 

93 

2   ^ 

Q 

3  ^ 

S3 

o 

§ 

fl  <S 

O 

S-M 

B 

C 

H 

}J 

• 

*| 

§ 

I 

E 

ajS 

. 

1 

> 

pfl 

1 

8 

.  ca 

< 

1 

1 

g 

K 

•     ,^,-  .                      || 

1 

B| 

1 

1  § 

1 

•a  •« 

H 

11 

31 

J.  g 

Si 

p  « 

PnO 

Si 

.a-S 


O 


136  PURCHASING 

keeper  received  the  material  or  not  when  it  first  arrived 
into  the  establishment,  he  has  to  receive  it  into  the 
storeroom  with  proper  checks  and  records. 

If  reference  is  made  to  the  forms  shown  in  Figures 
37,  39,  and  40  a  clear  understanding  can  be  had  of  the 
method  outlined  for  recording  receipt  of  material. 
All  three  of  these  forms  are  not  always  necessary,  but 
two  of  them  must  be  used  whether  there  is  a  re- 
ceiving clerk  in  the  establishment  or  not.  The  store- 
keeper must  have  one  list  to  enable  him  to  enter  the 
material  on  his  perpetual  inventory  and  another  list 
must  go  to  the  purchasing  or  accountant's  office  for 
the  purpose  of  checking  invoice. 

Figure  39  illustrates  a  method  of  listing  the  ma- 
terial. This  is  arranged  in  a  similar  manner  to  the 
copy  sent  to  the  purchasing  agent,  Figure  37,  the  only 
difference  being  in  the  last  column.  This  is  used 
by  the  storekeeper  when  making  his  entry  on  the  per- 
petual inventory,  whereas  in  the  purchasing  department 
the  duplicate  form,  Figure  37,  is  used  when  checking 
invoice  with  material  received.  This  sheet  represents 
to  the  storekeeper  what  the  journal  does  to  the  book- 
keeper, and  he  debits  each  account  on  his  perpetual 
inventory,  which  is  his  ledger,  with  each  item  on  the 
receiving  sheet. 

The  copy  of  the  report  of  materials  received  into 
stores  which  goes  to  accountant's  office  will  probably 
need  a  column  for  inserting  the  value  of  the  goods,  as 
shown  in  Figure  40.  If  three  copies  are  made,  they 
should  register  with  each  other,  the  only  difference 
being  in  the  last  column.  This  difference  is  caused  by 
the  fact  that  the  storekeeper  is  mainly  interested  in 
quantities,  whereas  the  accountant's  interest  is  prin- 


OPERATION  OF  STORES 


137 


02 


a 


y 


•So 


PUR 

ORD 


138  PURCHASING 

cipally  in  values.  This  is  the  chief  distinction  in  the 
results  accomplished  by  their  bookkeeping. 

Having  checked  the  material  with  copy  of  purchase 
ing  agent's  order,  any  mistakes  on  the  part  of  the 
shipper  as  to  quantity  and  size  can  be  detected. 
Should  the  shipper  have  exceeded  the  number  of  ar- 
ticles or  weight  ordered,  this  will  also  be  discovered. 
If  it  is  decided  to  return  the  excess  quantity  or 
wrong  sizes,  this  can  be  done  much  more  conveniently 
before  the  material  is  placed  in  storage  bins  than  after- 
ward. In  large  plants  there  will  probably  be  an  in- 
spector to  examine  materials,  but  in  many  cases  the 
storekeeper  himself  will  examine  material  on  arrival 
and  determine,  as  far  as  such  an  examination  can  do 
so,  whether  or  not  it  conforms  to  the  description  and 
specification  on  order. 

If  the  material  is  to  be  subjected  to  tests,  samples 
must  be  sent  to  the  laboratory  which  is  maintained 
in  the  plant,  or  to  one  outside.  These  samples  must 
be  so  marked  or  separated  that  identification  is  posi- 
tive with  the  shipment  they  were  taken  from. 

Any  questions  which  arise  regarding  freight  on  goods 
in  or  out  of  the  establishment  must  be  taken  up  with 
the  man  in  charge  of  traffic,  or  reported  to  him. 

It  will  be  appreciated  from  this  brief  description 
that  the  man  in  charge  of  receiving  goods  fills  a 
responsible  position  in  connection  with  the  orders 
placed  by  the  purchasing  department.  Among  his 
duties  will  be  the  receipt  of  goods  returned  from 
customers,  and  he  should  have  specific  instructions 
whether  to  accept  or  refuse  these. 

After  the  material  has  been  received  and  properly 
counted,  weighed,  and  measured,  there  may  be  some 


OPERATION  OF  STORES  139 

articles  which  are  sent  directly  to  the  departments  in- 
stead of  to  the  stores  with  copy  of  receiving  slip,  which 
should  be  signed  and  returned  to  the  stores.  The  entry 
is  made  on  the  stores  record  exactly  as  if  the  material 
went  into  and  was  delivered  out  of  the  stores.  This 
keeps  the  cost  accounting  department  straight. 

Another  method  of  reporting  receipt  of  goods,  al- 
though not  generally  considered  as  good  as  that  out- 
lined, is  to  report  each  arrival  separately  and,  instead  of 
making  a  daily  list  of  materials  as  already  indicated 
by  Figure  39,  to  make  out  a  slip  for  each  shipment 
as  it  comes  in,  somewhat  on  the  lines  shown  in  Figure 
41.  A  copy  of  this  should  go  to  the  storekeeper,  a 
copy  to  purchasing  agent,  and  another  to  cost  depart- 
ment. The  last  named  will  require  to  know  des- 
tination of  material,  in  order  to  charge  it  to  proper 
account. 

Another  scheme  adopted  by  some  is  for  the  copy  of 
the  purchasing  agent's  order  to  be  signed  by  the  re- 
ceiving clerk  as  a  notification  of  receipt  of  material, 
making  out  no  receiving  slip.  This  has  many  objec- 
tionable features,  however,  and  it  would  be  only  in 
most  exceptional  circumstances  where  it  would  answer 
satisfactorily.  A  method  in  which  the  copy  of  pur- 
chasing agent's  order  is  used  to  report  receipt  of  ma- 
terial is  shown  in  Chapter  XIII.  Wide  experience  led 
to  its  adoption  in  this  case. 

It  is  important  that  the  material-received  sheets, 
or  receiving  slips  should  be  numbered,  as  they  are 
liable  to  get  lost  or  mislaid,  and  any  break  hi  the 
sequence  would  at  once  call  the  attention  of  the  pur- 
chasing or  cost  department  to  the  fact. 


140 


PURCHASING 


o 

! 

| 

1 

.§ 

1 

1 

0 

bJD 

t>. 

x 

0 

-«j 

1 

M 

.2 

^ 

1 

1 

•s 

s 

§ 

-3 

.^ 

rf 

•3 

| 

1 

•o 
•ta 

g   g 

fe 

1 

PH        OP 

o 

PH      "° 

1 

1 

g  1 

1 

I 

S  I 
g  1 

•S 

J 

1 

«: 

0    S 
G3 

«*-. 

t 

02  ^ 

^H 

Tt< 

6 

•yr 

QUANTITY 

i 

f~\ 

HH 

OPERATION  OF  STORES  141 

The  Proper  Storage  of  Materials  and  Supplies 

The  proper  storage  of  materials  and  supplies  is  of 
equal  importance  to  receiving  and  delivering  them. 
When  adequate  provision  has  been  made  for  receiv- 
ing goods,  examining  them,  reporting  poor  quality 
or  deficiencies,  there  is  the  problem  of  storing  them  for 
varying  periods.  There  are  several  things  to  be  con- 
sidered. One  hundred  dollars  in  the  cash  drawer 
would  be  locked  up;  there  may  be  one  hundred  dollars' 
worth  of  copper  bars  in  the  stores  which  should  be 
just  as  secure  from  theft,  or  one  hundred  dollars' 
worth  of  rubber  which  must  not  be  allowed  to  de- 
teriorate. 

The  stores,  therefore,  should  not  be  entered  by  any 
unauthorized  person  and  proper  receptacles  should 
be  provided  for  all  material.  It  is  not  possible  to 
give  a  description  that  would  fit  the  needs  of  every 
business,  but  generally  the  stores  must  be  equipped 
with  racks,  shelves,  bins,  drawers,  and  boxes  to  suit 
the  nature  of  the  materials. 

Some  considerations  are  common  to  any  stores; 
for  instance,  material  which  is  constantly  called  for 
should  be  within  easy  reach,  and  heavy  material 
should  be  at  a  convenient  height  for  loading  onto  a 
truck.  The  alleyways  should  not  be  too  narrow,  as 
the  racks  darken  them,  and  insufficient  space  makes 
it  awkward  to  get  material  out  promptly.  Some 
shelves  and  racks  are  built  narrower  at  top  than  at 
bottom  which  is  an  excellent  scheme  for  some  stores, 
giving  more  light  and  elbow  room  with  no  loss  in 
storage  capacity. 

A  scheme  which  has  been  adopted  by  some  and  may 


142 


PURCHASING 


commend  itself  to  others,  is  to  have  duplicate  bins  or 
bins  extending  through  from  one  aisle  to  the  next,  the 
object  being  to  place  new  material  in  one  side  and 
take  the  old  out  from  the  other  side.  This  is  to  pre- 
vent an  accumulation  of  old  stock.  Not  all  estab- 
lishments can  afford  the  room  for  this,  but  it  has  its 
advantages,  particularly  with  stores  which  are  liable 
to  deteriorate  with  age. 

In  large  plants  it  will  probably  be  necessary  to  have 
several  storerooms  located  near  departments  where 
material  will  be  used.  This  may  entail  some  dupli- 
cation of  stores,  but  will  be  fully  compensated  for  by 
the  saving  in  men's  time  in  obtaining  stores.  Some 
material  can  be  stored  outside,  including  such  things 
as  heavy  castings,  lumber,  fuel,  etc.,  but  all  should 
go  on  store  records. 

REQUISITION  ON  STOREKEEPER 

This  Requisition  will  not  be  accepted  if  order  No.  is  not  given,  if  it  is 
not  signed  by  foreman,  or  if  material  is  to  be  charged  to  more  than  one 
order. 


ORDER  No. 

QUANTITY 

DESCRIPTION 

SIZE  OR 
PATTERN  No. 

DATE. 


SIGNED. 


Foreman 

FIGURE  No.  42. — Requisition  on  storekeeper.     Size  about  4x6  inches  in 
duplicate. 


OPERATION  OF  STORES 


143 


Deliveries  from  Stores 

Not  less  important  than  the  receiving  and  storing 
is  the  delivering  of  stores.  There  must  be  a  properly 
authorized  list  of  foremen  or  others  who  are  em- 
powered to  sign  requisitions  for  withdrawing  material 
or  supplies  from  storeroom.  Irresponsible  persons 
should  never  be  given  the  power,  and  if  the  material 
is  small  in  bulk  and  high  in  intrinsic  value  the  fore- 
man's honesty  should  be  dependable.  Even  then,  and 
with  precautionary  measures  instituted  in  the  shop, 
some  losses  will  occur  from  pilfering.  There  will 
also  always  be  some  losses  through  waste,  but  with 
close  watching  and  safeguarding  it  can  be  reduced  to 
the  smallest  dimensions. 

There  are  two  methods  of  obtaining  goods  from 


DATE 


REQUISITION 
For  Material  or  Supplie 


ORDER  No. 


QUANTITY 

DESCRIPTION 

SIZE  OB  SYMBOL  No. 

Pep'tNo,                             Foreman 

Delivered 
To 

Delivered 
Bv 

FIGURE   No.  43.  —  Requisition    on    storekeeper.     An    alternate    to  figure 
No.  42. 


144 


PURCHASING 


stores,  the  one  principally  in  vogue  being  carried 
through  by  the  foreman  making  out  and  signing  a 
requisition  for  what  he  needs  for  the  product  his  men 
are  engaged  on.  Several  illustrations  of  these  are 
given  (see  Figures  42,  43,  and  44).  They  should 
state  clearly  the  exact  quantity  required,  with  size  or 
other  necessary  particulars  to  enable  the  stock  man  to 
deliver  material  promptly.  They  should  give  order 
number  and  any  details  which  are  essential  to  the 
work  of  the  cost  department  where  they  will  eventu- 
ally go.  They  should  be  in  duplicate  of  contrasting 
colors,  the  object  of  this  being  that  when  they  arrive 
in  the  cost  department  the  originals  are  easily  dis- 
tinguished from  the  duplicates.  Some  cost  depart- 
ments require  the  requisitions  to  be  ruled  with  a 
column  for  pricing  the  articles,  others  do  not;  this 


DATE 


REQUISITION 
For  Material  or  Supplies 


ORDER  No. 


QUANTITY 


DESCRIPTION 


SIZE  OR  SYMBOL     PRICE 


VALUE 


Dept-  No.- 


Foreman. 


Delivered 
To- 


Delivered 
By. 


FIGURE  No.  44. —  Requisition  on  storekeeper  with  column  for  inserting 
value  by  the  cost  accounting  department.  Same  size  as  Figures  No. 
42  and  No.  43. 


OPERATION  OF  STORES 


145 


column  is  for  use  only  in  that  department  (see  Figure 
44).  In  some  plants  it  might  be  advisable  to  give 
each  department  requisitions  of  contrasting  colors, 
and  in  large  plants  the  numbers  of  the  requisitions 
should  be  prefixed  by  a  distinguishing  letter  for  each 
department. 

The  original  only  is  sent  to  the  storeroom,  the  copy 
being  sent  by  the  foreman,  after  he  has  received  the 
material,  to  the  cost  department.  When  the  original 
finally  reaches  there,  they  can  be  checked  against  each 
other,  preventing  falsification  on  the  part  of  either 
foreman  or  storekeeper.  The  original  having  been 
presented  at  the  storeroom,  material  received  and 
receipted  for,  it  is  also  sent  to  the  cost  department  after 
the  necessary  clerical  work  is  done  in  stores.  Al- 
though not  essential,  it  is  advisable  to  have  the 


CREDIT 


MATERIAL  RETURNED  TO  STORES 
ORDER  No DATE 


QUANTITY 

DESCRIPTION 

SIZE  OR  PATTERN  No. 

j 

j 

Dep't  No  Foreman  ...  

Delivered 
By 

Received 
By 

FIGURE  No.  45. — Credit  requisition  for  material  returned  to  stores.     Same 
size  as  Figure  No.  42,  but  a  contrasting  color. 


146 


PURCHASING 


requisitions  numbered,  as  it  facilitates  the  work  of 
sorting  and  comparing  them  on  their  arrival  in  the 
accounting  department. 

There  will  be  from  time  to  time  an  excess  amount 
of  material  withdrawn  by  foremen,  or  shop  orders 
may  be  canceled  or  curtailed,  necessitating  the  return 
of  some  material  to  the  stores.  This  is  effected  by 
the  foreman  making  out  a  credit  requisition,  as 
shown  in  Figures  45  and  46,  the  original  and  dupli- 
cate of  which  he  sends  with  the  material,  and  proper 
credit  is  given.  The  duplicate  is  signed  by  the 
stock  man  and  returned  to  the  foreman,  who  sends  it 
to  the  cost  department. 

Another  method  of  obtaining  material  from  the 
stores  is  by  means  of  the  material  budget.  This 
is  used  in  some  factories  very  satisfactorily,  and  for 
certain  kinds  of  production  work  it  answers  splendidly. 


DATE 


CREDIT 
Material  Returned  to  Stores 


ORDER  No. 


QUANTITY 


DESCRIPTION 


SIZE  OR 
SYMBOL  No. 


PRICE 


VALUE 


Dep'tNo.- 


Foreman- 


Delivered 
By- 


Delivered 
To. 


FIGURE  No.  46.  —  Credit  requisition  for  material  returned  to  stores   with 
column  for  accountant  to  insert  value. 


OPERATION  OF  STORES 


147 


B 

1 

B 

.2 

0 

1 

'•     § 

J" 

1 

1 

|| 

I 

.a 

s 

<              O 

i-"i 

»                     M 

to    o 

5  a 

B 

|8 

| 

^1 

I 

"S    o 

ja 

'*"?      CO 
CD      fl) 

j3 

fe^ 

i 

S)   0 
D     £H 

jj 

•°-a 

^ 

11 

2      CO 
O     £3 

t| 

6  ^ 

^  3 

££ 

i1 

i 

H 

:s 

5          1    ® 

3 

p 

<!         k-<  ^ 

0 

3 

J? 

fe 

148  PURCHASING 

But  for  others  it  has  many  disadvantages  and  is  not 
practicable.  Where  it  can  be  used  effectively,  it  is 
a  better  check  on  material  used  than  the  requisition 
system;  it  lessens  the  accounting  work,  is  a  better 
check  on  loss  and  waste  in  the  shop,  and  brings 
investigation  when  more  material  is  required  than 
actually  specified. 

If  the  factory  is  engaged  in  manufacturing  some 
article  of  which  the  designer  or  drafting  room  can 
specify,  before  work  on  it  is  started,  all  the  material 
needed  to  the  minutest  detail^and  make  a  complete  list 
of  it.  the  budget  system  can  be  made  to  work  well. 
Figures  47  and  48  show  forms  used  for  making  the 
budget,  or  list  of  materials  in  a  number  of  machines 
or  articles  to  be  manufactured.  A  copy  of  this  is 
sent  to  the  storekeeper,  and  as  the  material  is  taken 
out  it  is  signed  for  in  the  space  indicated.  When 
all  the  material  is  delivered,  the  bill  of  material  is 
sent  to  the  cost  department.  This  method  simplifies 
the  work  of  the  cost  department  because  the  value 
of  the  material  can  be  figured  out  on  the  material 
sheet  itself  in  one  lump  sum  and  there  will  not  be  a 
lot  of  small  requisitions  to  deal  with.  It  is  a  better 
check  on  the  shop,  because  if  more  material  is  called 
for  there  must  have  been  loss  or  waste,  which  can 
then  be  investigated. 

The  advantages  of  this  method  will  be  lost  if  the 
scheme  is  not  rigidly  adhered  to,  and  if  it  is  rigidly 
followed  it  will  be  found  arbitrary,  inelastic,  and  slow 
in  any  emergency.  The  material  also  should  be  all 
drawn  from  stores  within  a  reasonable  time;  if  not,  the 
sheet  will  be  in  use  in  the  storekeeper's  hands  for  such 
a  long  time  as  to  become  illegible  or  probably  lost. 


OPERATION  OF  STORES 


149 


6 
fc 

i 

B 

a 

0 

fc 
j« 
e 
• 

P 

1 

o 

> 

Q 

1 
« 
B 

1 

«<    o 

AMOUNT 

s 

DATE 
ISSUED 

ISSUED 

BY 

RECEIVED 

BY 

PATTERN 
No. 

DRAWING 
No. 

MATERIAL 

NAME  OF  PART 

o  w 
o  w 

ITEM  No. 

150  PURCHASING 

Stores  Accounts 

It  has  been  explained  in  what  manner  the  material 
goes  into  and  out  of  the  stores,  and  it  is  absolutely  es- 
sential that  an  exact  record  should  be  kept  of  these 
incomings  and  outgoings.  Theoretically  a  storekeep- 
er's account  should  balance  as  accurately  as  a 
cashbook  does  with  the  cash  on  hand,  but  this  is 
never  the  case.  It  is  remarkable,  however,  how 
closely  the  records  tally  with  physical  counts  in  well- 
kept  stores.  Well  arranged  and  lighted  buildings 
with  honest  and  intelligent  help  are  all  conducive 
towards  this  end.  There  is  nothing  complicated  or 
intricate  in  stores  accounting,  but  care  and  accuracy 
are  essential  as  in  every  other  form  of  bookkeeping. 
With  these  characteristics  the  work  will  be  found 
comparatively  easy  for  any  man  with  only  a  rudi- 
mentary knowledge  of  accounting. 

The  whole  scheme  of  stores  accounting  centers 
around  the  perpetual  inventory  (see  Figure  49).  It 
is  the  ledger  of  the  system,  carrying  accounts  with 
each  description  of  material  or  supplies  kept  in  stock, 
with  debit  and  credit  columns  arranged  so  that  a  bal- 
ance can  be  readily  calculated.  The  location  of  the 
article  should  be  given;  this  corresponds  to  the  ad- 
dress of  a  customer  in  the  sales  ledger,  and  the  amount 
of  credit  he  is  entitled  to  is  comparable  to  the  maxi- 
mum stock  permitted.  The  illustration  of  a  perpet- 
ual inventory  shown  in  Figure  49  is  arranged  for 
recording  quantities  only,  which  is  all  the  majority 
of  stores  are  required  to  do.  Some  storekeepers 
have  to  record  values  and  quantities,  but  these  are 
exceptional  cases.  The  cost  accounting  department 


OPERATION  OF  STORES 


151 


1 

1 

< 

P5 

• 

Q 

<! 

1 

P 

C? 

1 

1 

6 

2 

tf 

5 

Q 

BALANCE  | 

1 

f 

g 

fc 

0 

Q 
H 

t> 

b 

C? 

LOCATI 

6 
3 

c 
2 

| 

1   - 

6 
<y 

& 

B 

I 

Q 

QUANTITY 

RECEIVE 

ORDER  No. 

I 

Q 

g 
P 

a 

| 

ORDERE 

ORDER  No. 

C 

1 

152  PURCHASING 

usually  takes  care  of  the  values,  but  there  may  be 
reasons  why  they  should  be  kept  in  both  depart- 
ments, in  which  case  the  perpetual  inventory  would 
have  to  be  arranged  accordingly.  See  Figure  50 
for  this  form. 

On  receipt  of  anything  into  the  storeroom,  the 
proper  entries  must  be  made  on  the  perpetual  inven- 
tory. This  will  be  done  from  material-received  reports, 
credit  requisitions  for  material  returned  from  shop,  or 
any  other  forms  used  to  indicate  receipt  of  articles.  All 
of  these  documents,  before  being  posted  or  entered 
on  the  perpetual  inventory,  will  of  course  have  been 
checked  and  it  must  be  known  that  the  material  is 
actually  in  the  stores.  In  this  respect  they  are  synony- 
mous with  invoices,  which  would  not  be  accepted  as 
correct  and  entered  in  the  ledger  until  checked;  sim- 
ilarly the  material-received  sheets,  etc.,  must  be  ab- 
solutely correct  before  being  entered  in  the  perpetual 
inventory.  If  a  copy  of  the  material-received  report 
has  been  sent  to  the  accounting  department,  the  stores 
copy  can  be  filed  away  for  reference.  The  memo- 
randums received  from  the  shop  with  materials  to  be 
credited  must  be  sent  to  the  accountants  to  enable  them 
to  check  with  copies  received  from  foremen,  and  make 
the  proper  credits  to  production  orders. 

Nothing  should  be  permitted  to  leave  the  stores 
without  a  voucher  to  show  for  it.  These  consist 
of  the  requisitions,  which  must  be  entered  on  the  per- 
petual inventory  and  promptly  sent  to  the  accountant's 
department.  It  is  absolutely  essential  that  these 
entries  of  articles,  both  into  and  out  of  stores,  are 
correctly  and  accurately  recorded,  otherwise  the  whole 
object  of  the  scheme  will  be  defeated. 


OPERATION  OF  STORES 


153 


<D 

BALANCE 

QUANTITY 

I 

CO 

H 

I 

1 

^  ^ 

| 

r 

Q 

s 

g 

^ 

g 

§ 

NIMUM 

QUANTITY 

3 

s 

I 

1 

• 

| 

8 
1 

P 

WEIGHT 

o 

1 

QUANTITY 

M 

Q 

LACED 

C 
Ij 

& 

a 

i 

i 

1 

PH 

§ 

H 

Ii 

i 

< 

) 

H 

1 

p 

§ 

Q 

154 


PURCHASING 


Periodical  verifications  should  be  made  by  actual 
physical  count  or  weighing.     It  is  not  sufficient  to  do 


BIN  TICKET 


Bin  No. 


Location. 


Material- 


Drawing  No- 
Pattern  No- 


Size- 


in  bin,  and  replace  it  with  temporary  ticket. 

DATE 

IN 

RECEIVED  OR 
ISSUED  BY 

OUT 

BALANCE 

FIGURE  No,  51. — Storeroom  bin  ticket.    Size  3x7  inches. 


OPERATION  OF  STORES  155 

this  only  when  a  general  inventory  is  taken.  How 
often  it  should  be  done  depends  on  the  nature  of  the 
stock.  It  is  not  necessary  to  verify  every  item  at 
one  time;  the  stores  can  be  divided  into  sections, 
and  the  work  of  checking  done  when  it  will  not  dis- 
turb the  general  routine  work  going  on.  When  there 
is  an  opportunity,  which  comes  frequently  in  almost 
every  storeroom,  the  help  should  be  set  to  count- 
ing or  weighing  articles  or  materials  and  when  veri- 
fied notification  should  be  made  on  the  perpetual 
inventory.  By  this  means  the  whole  stores  should  be 
covered  every  two  or  three  months,  which  will  proba- 
bly be  found  often  enough.  No  disturbance  or  dislo- 
cation of  regular  work  will  occur  and  anything  wrong 
will  be  discovered  promptly.  The  storekeeper  will 
have  the  satisfaction  of  knowing  that  his  stores 
and  accounts  are  in  good  and  reliable  shape. 

Stores  Tickler  System 

In  making  entries  on  the  perpetual  inventory,  close 
watch  should  be  kept  of  balance  to  see  how  near  it 
is  to  minimum.  The  stock  man  taking  articles  from 
bins  can  also  watch  this  and  notify  the  chief  storekeeper 
by  means  of  tickets  (see  Figures  51  and  52).  One 
is  the  regular  ticket,  Figure  51,  which  is  detached  from 
its  hook  and  sent  to  the  storekeeper  when  minimum  is 
reached.  In  its  place  the  stock  man  hangs  the  tempo- 
rary ticket,  Figure  52,  which  should  be  a  different 
color.  This  remains  there  until  additional  articles 
are  received  to  bring  quantity  above  minimum.  The 
regular  ticket  is  returned  by  the  storekeeper  when  an 
order  has  been  placed,  and  both  it  and  the  temporary 
ticket  remain  together  until  goods  are  received.  This 


156 


PURCHASING 


indicates  to  the  stock  man  that  both  he  and  the  chief 
storekeeper  have  given  the  matter  attention. 


TEMPORARY  TICKET 

When  only is  left  in  bin,  send  regular  ticket  to 

storekeeper  and  put  this  in  its  place.  When  regular  ticket  is  returned, 
hang  both  of  them  together  until  stock  is  above  min.,  after  which 
remove  this  ticket. 


No. 


Material 

Drawing 
Pattern  Is 
Size 

Ho 

to 

DATE 

IN 

RECEIVED  OR 
ISSUED  BY 

OUT 

BALANCE 

» 

FIGURE  No.  52. — Temporary  ticket  for  storeroom  bins. 
Same  size  as  Figure  No.  51,  but  contrasting  color. 


OPERATION  OF  STORES  157 

In  previous  chapters  special  emphasis  has  been  placed 
on  the  desirability  of  keeping  the  amount  of  stores 
on  hand  at  the  minimum.  There  are  important  eco- 
nomic reasons  for  this.  To  maintain  the  stores  at  the 
minimum  and  at  the  same  time  maintain  an  ample 
factor  of  safety  in  so  far  as  supplying  the  require- 
ments of  the  factory  are  concerned  means  that  the 
stores  tickler  system  should  provide  proper  guaran- 
ties and  safeguards  to  protect  this  factor  of  safety. 
Therefore  it  should  be  rigidly  kept  up. 

In  some  stores  regular  bin  tickets  are  not  used  and 
a  simpler  form  of  tickler  ticket  can  be  adopted  (see 
Figures  53  and  54).  In  this  case  the  minimum  will 
be  marked  on  bin,  and  when  it  is  reached  the  stock 
man  sends  the  first  ticket  to  the  chief  storekeeper  who 
makes  requisition  on  the  purchasing  agent  and  returns 


BIN  No.- 


MATERIA: 


Min.  reached  and  ticket  sent 
to  storekeeper. 


DATE. 


Stockman 


Requisition  sent  to  purchasing  agent. 
DATE 

Storekeeper 
FIGURE  No.  53. — Tickler  ticket  for  storeroom  bins  about  2x3  inches. 


158  PURCHASING 

ticket  to  the  bin.  The  second  ticket  is  then  sent  to 
the  chief  storekeeper,  who  retains  it  until  he  receives 
copy  of  purchase  order,  when  it  is  returned  to  bin. 
The  reason  for  using  the  second  ticket  is  that  it  proves 
a  sure  check  on  both  storekeeper  and  purchasing 
agent.  The  storekeeper  on  receipt  of  first  ticket 
makes  a  requisition,  but  if  it  is  mislaid  or  not  acted 
on  by  the  purchasing  agent,  the  second  ticket  brings 
it  to  his  attention.  The  stock  man  at  the  bin  would 
also  have  his  attention  drawn  to  the  failure  to  order 
a  new  supply  if  the  second  ticket  did  not  come  back. 
These  tickets  should  be  in  contrasting  colors. 

Scrap 

All  scrap  should  be  sent  to  the  storekeeper,  who 
should  weigh  it  and  arrange  a  place  in  his  store- 
room for  such  of  it  as  requires  to  be  kept  locked  up. 


BIN  No.. 


MATERIAL 


Requisition  notice  received. 

Stockman 

Order  placed  by  purchasing  agent. 
DATE 

Storekeeper 

FIGURE  No.  54 — Tickler  ticket  for  stock  room  bins.     Same  size  as  No.  53, 
but  different  color. 


OPERATION  OF  STORES 


159 


He  should  advise  purchasing  agent  on  a  form  similar 
to  Figure  56.  The  purchasing  agent  will  make  a  sale 
when  he  sees  a  favorable  market,  and  the  scrap  will 
then  be  delivered  to  the  shipping  clerk. 

Fixing  the  Maximum  and  Minimum 

In  some  plants  the  storekeeper  does  not  make  requi- 
sitions on  the  purchasing  agent  to  buy  material,  but 
instead  sends  him  a  report  that  stock  has  reached 
the  minimum  (see  Figure  55).  In  this  case  the  pur- 
chasing agent  would  decide  from  his  records  what 
quantity  to  order  and  the  date  delivery  would  be 
required.  The  whole  question  of  fixing  a  minimum 
is  a  matter  for  careful  consideration.  To  obtain  the 
best  economic  results  the  stock  should  be  kept  at 


REPORT  OF  LOW  STOCK 


To  PURCHASING  AGENT  : 

The  Stock  of  the  following  1 
have  reached  the  minimum.    / 


DATE. 


Storekeeper. 


MATERIAL 

MINIMUM 
ALLOWED 

Now  IN 
STOCK 

1              REMARKS 

FIGURE    No.   55. — Report    from    storekeeper    to    purchasing    agent   that 
stock  has  reached  the  minimum.     Size  4x6  inches. 


160  PURCHASING 

lowest  point  consistent  with  safety,  and  to  do  this 
a  study  must  be  made  of  the  rate  of  consumption, 
probable  future  rate,  and  estimated  time  required 
for  delivery. 

If  there  is  no  material  budget,  the  storekeeper  will 
probably  receive  copies  of  production  orders,  which 
he  can  check  with  stock  he  has  on  hand,  as  he  should 
know  the  quantities  of  material  needed  for  these 
orders,  and  will  then  be  able  to  requisition  what  is 


DATE- 
TO  THE  PURCHASING  AGENT, 

There  has  been  received  into  Storeroom 


of Scrap.     The  total  quantity  now  on  hand 

awaiting  your  instructions  for  disposal  is 


Storekeeper. 

FIGURE  No.  50. — Report  from    storekeeper  to  purchasing   agent   that 
scrap  has  been  received.     Size  4x6  inches. 


required  to  execute  the  orders  as  they  progress  through 
the  shop. 

Before  leaving  the  stores  question  another  word  or 
two  about  maximum  and  minimum  is  not  out  of 
place.  Take  the  simpler  proposition  of  supplies  first. 
The  records  kept  in  the  purchasing  office  will  determine 
the  exact  quantities  used  in  a  given  period  and  any 
intelligent  person  can  fix  the  high  and  low  with  the 
above  mentioned  records  as  a  basis  and  also  taking 
into  consideration  the  most  economical  quantities  to 
buy  in  the  matter  of  price,  freight  charges,  etc. 

The  maximum  and  minimum  on  materials  are  more 


OPERATION  OF  STORES  161 

difficult  to  determine  owing  to  the  fluctuations  in 
business  and  the  changes  in  styles  of  articles  manu- 
factured and  methods  of  fabricating.  There  are  no 
insuperable  difficulties  if  the  sales  manager,  produc- 
tion manager,  and  purchasing  agent  get  together. 

The  first  man  can  estimate  approximate  sales, 
the  second  man  can  tell  what  shop  changes  are  likely 
to  take  place,  and  the  third  man  knows  what  quan- 
tities he  can  buy  to  most  economical  advantage. 
Time  is  an  important  factor  to  be  considered.  The 
necessary  time  to  make  the  sales,  to  manufacture  the 
articles,  and  to  obtain  delivery  of  raw  material.  Fix 
the  maximum  of  raw  material  low  on  articles  likely 
to  go  out  of  fashion,  however  attractive  a  purchase  may 
look.  On  standard  manufactured  products  with  a 
steady  and  regular  sale  the  proposition  is  simple.  On 
other  goods  sound  judgment  and  common-sense  will  de- 
termine the  question.  The  economic  benefits  and  ad- 
vantages have  been  discussed  before.  Overbuying 
and  underbuying  are  both  very  expensive  things  to 
indulge  in.  Steering  the  right  course  in  any  business 
operation  is  a  most  valuable  factor  and  in  the  function 
of  purchasing  it  is  pre-eminently  so. 


CHAPTER  XII 
PURCHASING  FOR  RAILROAD  CONSTRUCTION  WORK 

WHEN  the  writer  was  appointed  purchasing 
agent  for  the  Underground  Electric  Railways 
of  London,  England,  he  had  to  inaugurate  a  system 
which  would  be  sufficiently  comprehensive  to  carry- 
out  the  functions  of  the  department  as  required  by  the 
directors,  and  which  at  the  same  time,  owing  "to  the 
character  of  the  construction  work,  would  be  as  simple 
as  possible.  An  understanding  of  the  stupendous  na- 
ture of  the  enterprise  can  be  formed  from  the  fact 
that  the  expenditure  for  materials,  equipment,  and 
supplies  exceeded  the  sum  of  $30,000,000.  A  better 
cognition  of  this  can  be  gathered  from  what  the  con- 
struction work  covered,  also  a  better  perception  of 
what  the  purchasing  of  such  a  vast  amount  implied. 

The  undertaking  comprised  the  construction  of 
three  new  tube  railways,  the  electrification  of  the  old 
underground  steam  railroad,  the  construction  of  a 
central  generating  station  and  twenty-two  trans- 
former stations,  over  fifty  new  passenger  stations, 
and  the  rebuilding  of  some  of  the  old  ones.  It  also 
included  the  erection  of  four  car  sheds  with  shops 
containing  machinery  and  tools  for  assembling  and 
equipping  the  cars,  and  for  their  repair  and  main- 
tenance when  in  operation. 

The  work  was  all  carried  out  within  a  radius  of 
twelve  miles  from  the  head  office,  where  the  chief 


PURCHASING  AS  PRACTISED  163 

engineer  and  purchasing  agent  were  located.  Owing 
to  the  circumscribed  area  in  which  the  work  was 
executed,  it  was  possible  to  be  in  almost  daily  con- 
tact with  the  engineers  who  had  charge  of  the  various 
descriptions  of  construction,  such  as  track  work,  car 
equipment,  generating  station,  automatic  signaling 
equipment,  etc. 

The  magnitude  of  the  enterprise  involved  the  pur- 
chase of  enormous  quantities  of  material,  but  to  a 
certain  extent  this  was  simplified  by  the  absence  of 
some  of  the  details  usually  associated  with  the  work 
of  a  purchasing  agent's  office,  and  described  in  earlier 
chapters.  In  a  manufacturing  establishment  it  is  nec- 
essary to  keep  some  exact  and  minute  records  which 
are  not  essential  to  such  work  as  this,  where  the 
stores  are  usually  temporary  and  merely  serve  as  a 
place  where  material  can  be  protected  until  used,  and 
few  stores  records  are  kept. 

The  requisitions  were  based  on  estimated  quantities 
required,  and  orders  were  placed  accordingly  with 
stipulations  as  to  deliveries,  which  corresponded  as 
closely  as  possible  to  the  progress  of  the  work,  and 
compatible  with  the  nature  of  the  material,  its  liabil- 
ity to  deterioration  and  perishable  character. 

These  requisitions  came  into  the  purchasing  de- 
partment in  a  continual  stream,  and  covered  an 
almost  unprecedented  variety  of  materials  and  sup- 
plies required  for  the  execution  of  the  work.  They 
included  such  things  as  steel  rails,  high  and  low 
tension  cables,  cement,  special  and  unusual  descrip- 
tions of  lumber,  electric  light  fittings,  self-winding 
clocks,  all  kinds  of  equipment  for  cars,  car  barns,  and 
stations  down  to  the  almost  infinitesimal  things  in 


164  PURCHASING 

the  way  of  supplies  necessary  in  carrying  out  such 
work. 

The  system  adopted  for  making  these  purchases 
comprehended  the  use  of  as  few  forms  as  possible,  but 
at  the  same  time  it  was  essential  that  the  records 
should  be  reliable,  easily  accessible,  and  kept  in  com- 
pact and  concise  form. 

The  engineer  in  charge  of  each  division  of  the  work 
was  authorized  to  sign  requisitions  and  was  furnished 
with  a  book  of  them,  the  color  system  being  adopted 
to  facilitate  filing.  They  were  further  distinguished 
by  being  in  alphabetical  series  so  that  each  engineer 
knew  his  serial  letter  and  color.  This  served  several 
good  purposes,  as  all  requisitions  for  each  division 
were  filed  together  in  one  binder,  which  could  be 
picked  out  without  hesitation  by  its  color  as  belonging 
to  generating  station  work,  track  work,  car  sheds, 
etc.  When  the  order  was  issued,  the  requisition 
number  appeared  on  it,  and  the  order  number  was 
inserted  on  requisition.  Thus  any  requisition  could 
be  found  at  a  moment's  notice  by  referring  to  the 
order  or  the  order  found  by  referring  to  the  requi- 
sition. 

The  usual  method  of  procedure  was  followed  in 
dealing  with  the  requisition.  In  those  cases  where 
prices  had  been  established,  orders  were  issued  im- 
mediately the  examination  of  the  requisition  showed 
it  was  properly  validated  and  in  good  order.  When 
the  material  was  special,  the  usual  requests  for  quota- 
tions had  to  be  sent  out,  received,  and  compared 
before  placing  order.  Owing  to  the  nature  of  the 
work,  the  variety  of  material  .demanded  by  the  engi- 
neers was  astonishing.  Requisitions  came  in  fre- 


PURCHASING  AS  PRACTISED 


165 


166 


PURCHASING 


\J 


PURCHASING  AS  PRACTISED 


167 


quently  for  something  entirely  distinct  from  anything 
purchased  before.  This  necessitated  searching  the 
market  for  sources  of  supply  to  meet  these  new  de- 


5 

I 


II 

S    M 

B-l 


3 


II1 


C  S3    fl 

1  0-2 

A    ^     O 

2  M  2 

fi! 


mands.  It  did  not  matter  how  exhaustive  the  records 
were  in  the  office,  or  how  diligently  they  were  kept 
up,  it  was  found  that  information  was  lacking  regard- 
ing something  not  commonly  called  for.  It  was  found 


168  PURCHASING 

also  that  the  market  for  those  goods  which  were  being 
bought  regularly  could  be  broadened  and  improved 
by  keeping  continually  at  it.  This  was  owing  to  the 
changes  in  manufacturing  methods  and  in  firms  who 
started  making  a  new  line  of  goods  and  many  other 
causes.  It  goes  to  show  that  there  is  no  finality  to 
the  acquirement  of  this  class  of  information. 

There  were  some  unusual  features  connected  with 
the  order  which  deserve  explanation.  The  directors 
required  copies  of  all  orders  kept  in  the  office  by  the 
press  copying  method.  The  reasons  for  this  were 
partly  legal  and  are  not  necessary  to  explain  here. 
It  seemed  a  cumbersome  method  as  a  carbon 
copy  had  to  be  sent  to  the  engineer  who  made 
the  requisition,  and  it  would  have  been  quite  easy 
to  make  another  one  for  use  in  the  purchasing  agent's 
office. 

Having  the  impression  copy,  a  carbon  was  not  nec- 
essary for  the  scheme  adopted,  which  worked  out 
admirably,  and  when  the  construction  work  was 
completed  the  records  of  nearly  40,000  orders  in- 
volving an  expenditure  of  over  $30,000,000  were  all 
contained  in  a  small  filing  cabinet  less  than  four  feet 
wide  and  five  feet  high. 

Referring  to  the  order  form  above,  Figure  59,  this 
is  exceedingly  simple  in  its  wording,  many  clauses 
which  usually  appear  being  absent  because  every 
purchase  made  in  Great  Britain  was  on  the  basis  of 
freight  being  paid  by  the  consignor.  An  English 
freight  rate  includes  collection  from  the  consignor's 
premises  and  delivery  to  consignee's  premises,  so  we 
had  no  teaming  or  traffic  problems  to  deal  with,  and 
the  freight  being  paid  by  the  shipper,  he  specified  the 


PURCHASING  AS  PRACTISED 


169 


route,  unless  there  was  some  exceptional  circumstance 
connected  with  the  shipment. 

Immediately  this  order  was  sent  out  a  card  was 


CO 

o 

OD 


ud 
i-b 

ss 


si 

I? 


made  out  (see  Figure  60).    This  card  bore  in  the  right- 
hand  top  corner  the  same  number  as  the  order,  and 


170 


PURCHASING 


in  fact  contained  all  the  particulars  of  the  order  in  an 
abbreviated  form.     On  it  were  also  recorded  the  quo- 


tations received.  This  was  called  the  record  card 
because  on  it  was  recorded  a  synopsis  of  the  whole 
transaction  including  particulars  of  the  requisition 


PURCHASING  AS  PRACTISED 


171 


condensed,   enough   information   regarding  the   order 
for  ordinary  reference,  a  summary  of  quotations  re- 


CO 

I         I 

i       I4 

^ 

i   •£       -'i 

^ 

g               gr| 

-J 

<§      .91 

oc 

1      S 

ui 

g            •"" 

o 

3 

^         CO 

oc 

9 

i         T 

1- 

O 

oc 

o 

LU 

1 

O      Q       co 
o              3 

i 

LU 

§ 

o 

^ 

Q 

- 

I 

Z 
D 

1 

| 

O 
OC 

! 

1                & 

o 

M 

"e             = 

oc 

III 

1 

B 

III 

Q 

Z 
D 

1 

1! 

M 

§>  12 

g 

O 

'5  ^ 

Q 

j  § 

Z 

'"§  § 

(3 

tq    1 

i 

i 

-§ 

• 

<& 

i 

00 

s 

I 


ceived,  date  of  advice  of  shipment,  and  finally  a  com- 
plete list  of  the  invoices  (Figure  61). 
These  invoices  were  recorded  on  the  reverse  side 


172 


PURCHASING 


CO 

0 

oe 

CO 

I—I 

Z 

Ul 

oe 

OUNT 

5 

< 

Ul 

^ 

h 

j 

0 

u 

oe 

8 

oe 
u 

a 

ui 

0 

/       1 

i 

U 

a 

a 

f       V  | 

0 

0 

\ 

/  — 

K 

0 

0 

U 

0 

DC 

oe 

c 

0 

u 

h 

z 

IP 
oe 
u 

O 

o 

0 

z 

Ul 

| 

j 

111 

N 

H 

i  • 

£ 

u 
h 

o 

oe 

0 

X 

»- 

! 

Z 

8 

• 


PURCHASING  AS  PRACTISED  173 

of  this  card  (see  Figure  61),  including  date  sent  out 
for  approval,  date  checked,  and  when  finally  approved 
and  passed  for  payment.  Where  an  order  was  for  a 
large  number  of  articles,  such  as  10,000  malleable 
iron  castings,  it  was  possible  for  so  many  shipments 
to  be  made  that  one  card  would  not  contain  a  record 
of  all  the  invoices,  in  which  case  an  additional  card 
was  inserted,  spares  being  kept  for  this  purpose. 
Such  cases  were  rare,  however,  and  applied  princi- 
pally to  such  things  as  air  compressors,  motors,  etc., 
which  w^ere  ordered  in  large  quantities  and  delivered 
a  few  at  a  time,  as  required  during  progress  of  the 
work. 

The  regulations  of  the  company  called  for  the  ap- 
proval of  the  invoices  on  their  face  by  the  engineer  in 
charge  of  the  particular  work  where  the  material 
was  used,  and  also  by  the  purchasing  agent.  When 
an  invoice  was  received  in  the  purchasing  agent's  office 
it  was  checked  with  the  order,  recorded  on  the  card, 
Figure  61,  and  sent  at  once  to  the  engineer  who  drew 
the  requisitionf  accompanied  by  a  notice  as  illustrated 
in  Figure  62.  It  was  approved  by  him  for  quality  and 
quantity,  and  returned  to  the  purchasing  agent,  who 
approved  it  for  price,  terms,  etc.  If  material  had 
been  inspected,  inspection  reports  were  checked  with 
invoices  which  were  finally  passed  to  accountant. 

This  is  briefly  the  manner  in  which  the  purchases 
were  effected  and  the  records  of  them  kept  for  this 
vast  enterprise.  In  a  small  filing  cabinet  a  succinct 
history  could  be  obtained  of  nearly  40,000  transac- 
tions. An  index  of  the  orders  was  of  course  kept 
both  under  the  supplier's  name  and  name  of  material. 
The  requisitions  were  filed  in  loose-leaf  post  binders, 


174 


PURCHASING 


1 

•I 

.g 

it 

0 

d  indicates 

SENT  TO 
UNTANT8 

INVOICE 

i— 

i 

i 
s 

d 
§ 

UO 

u. 

\        v  1 

s, 

£8 

0 

<£ 

Q< 

Oft 

£C 

i_f  —  1 

.3 

D 

| 

O 

^ 

h 

•S 

a 

i 

.2 

DATE  OF 
INVOICE 

URE  No.  64.— 
recorded. 

o 

£ 

PURCHASING  AS  PRACTISED  175 

the  posts  being  arranged  to  take  exactly  1000  requisi- 
tions. If  at  any  time  complete  information  as  to 
wording  of  requisition  or  order  was  required  or  the 
cards  did  not  give  enough  details,  the  copy  of  order 
and  original  requisition  could  be  referred  to  without 
the  slightest  delay.  There  was  a  tickler  system  main- 
tained on  similar  lines  to  the  one  described  in  an 
earlier  part  of  this  book. 

During  the  progress  of  the  work,  scrap  accumulated 
and  had  to  be  sold,  one  of  the  principal  items  being 
copper;  also,  as  the  work  neared  completion,  portions 
of  the  equipment  and  tools  used  in  construction  were 
disposed  of  through  the  purchasing  department.  A 
record  of  these  sales  was  kept  on  a  card  (see  Figure 
63),  the  reverse  side  recording  particulars  of  material 
and  date  invoiced  by  accountants. 

Purchasing  for  Operation 

As  portions  of  the  work  were  completed,  the  con- 
struction company  operated  trains  on  those  sections 
and  also  operated  the  generating  station.  This  neces- 
sitated a  modification  in  the  form  of  the  requisitions 
and  orders  as  they  covered  requirements  for  the  per- 
manent stores  at  the  car  shops  and  generating  station. 
The  inauguration  of  a  system  was  therefore  essential 
to  take  care  of  these  functions  until  the  completed 
undertaking  was  taken  over  by  the  operating  staff. 
The  coal  for  the  power  house  was  the  most  important 
purchase  effected  at  the  commencement  of  the  opera- 
ting work. 

The  generating  station  at  that  time  consumed  ap- 
proximately 300  tons  of  coal  per  day,  which  had  to 
be  supplied  in  regular  quantities  at  short  intervals 


176  PURCHASING 

owing  to  the  limited  storage  capacity  and  the  charac- 
ter of  the  coal  itself. 

It  was  found  that  a  screened  and  washed  coal  of 
a  certain  size  with  a  restricted  range  in  B.  T.  U.'s 
gave  the  most  economical  results  on  the  automatic 
stokers,  and  any  deviation  from  the  size  or  heat  units 
of  the  coal  selected  as  most  suitable  seriously  affected 
its  calorific  value  during  consumption,  and  correspond- 
ingly affected  the  output  of  the  generating  station. 

A  specification  was  drawn  embodying  the  desirable 
features  required  in  the  coal.  The  size  was  specified 
by  naming  the  mesh  of  a  screen  it  would  pass  over 
and  through.  The  allowable  range  in  B.  T.  U.'s  was 
specified,  and  the  maximum  percentage  of  ash,  sul- 
phur, and  foreign  substances.  To  obtain  sufficient 
coal  of  this  character  it  was  necessary  to  visit  many 
collieries  and  inspect  their  screening  and  washing  ar- 
rangements. Samples  were  obtained  and  subjected 
to  analyses  in  our  own  laboratory. 

On  the  strength  of  these  analyses  the  orders  were 
placed.  It  looked  a  fairly  simple  proposition  to  buy 
such  coal,  but  it  was  far  from  being  that.  There 
was  no  physical  connection  at  the  generating  station 
with  any  railroad  and  all  coal  had  to  be  lightered 
up  the  river  after  being  brought  from  the  north 
of  England  and  Scotland  in  coasting  steamers.  As 
a  result  of  this,  the  coal  was  handled  four  times  after 
being  screened  at  the  pit  mouth,  causing  breakage 
and  an  excessive  amount  of  dust.  Different  grades 
and  coal  from  widely  separated  mines  could  be  mixed 
in  one  barge  when  steamers  were  discharged  in  the 
river.  The  discrepancies  in  weights  as  given  by  the 
colliery,  by  the  steamship  owner,  and  as  loaded  on 


PURCHASING  AS  PRACTISED 


177 


the  barges  and  as  finally  weighed  on  arrival  at  the 
generating  station  were  beyond  understanding. 
To    overcome    these   disagreeable    features   it 


o 

\ 

i 

i 

! 

| 

i 

9 

o 

i 

i 

4 

i 

Q 

r 

A 

J 

i 

S 

/ 

1 

•* 

CO 

•i 

| 

fp 

CD 

E 

• 

e 
o 

"a. 

District 

1  Shipping  Pot 

c 

«C 

1  Moisture 

"as 

2 

= 
1 

o 

.O 

E 
ri 
O 

1 
u_ 

c. 
a. 

3 
CO 

1 

5 

d 

1  Remarks 

was 

1 


>J       Q         ?*•> 

1    a;    c3 
S   w>  9. 


II-! 

O      r^      M 

8  ^  $ 

M  a  -° 

£&  > 


1 

1. 


3 1 


finally  stipulated  that  the  only  weights  recognized 
would  be  those  registered  by  our  own  automatic  scales 
when  discharging  barges  at  the  generating  station,  and 


178 


PURCHASING 


the  only  analytical  tests  as  a  basis  for  payment  would 
be  those  made  of  samples  taken  from  barges  while 
being  unloaded.  The  breakage  and  dust  could  not 


a 

*d 


be  altogether  overcome,  but  by  insisting  on  more 
careful  and  better  methods  of  handling,  this  was  con- 
siderably reduced. 


PURCHASING   AS   PRACTISED 


179 


Q 

5 

h 

•C 

j 

1 

Z 

a 

1 

O 

Q 

oj 

Q 

* 

a 

O 

I 

1 

Ik 

I 

1 

I 

Q. 

^ 

•§ 

O 
O 

i 

j  unload 

o 

| 

o 

^ 

o 

jj 

h 

ej     5J 
§ 

£ 

6 

^ 

J 

hi 

e  •** 

mm 

h 

0 

m 

z 
u 

.f  !§ 

0 

X 
i^    a 

o    o 

t^      *r-j 

E 

Z     a 

^   §" 

H 

o    s 

»  'S 

o 

<     u 

^    6 

u 

J 
u 

f! 

<      0 

J    1 

s 

S 

f 

o 
z 

D 

I!- 

?    2 

**•   -IS 

o 

o 
E 

oJ 

0       I    o 

Jg 

Z 

K         J     I 

o 

<      *                 0 

u      o  J 

}8  »3  J 

p  1  I 

1 

1*8 


t! 


•8 

I 

i 

i 


180 


PURCHASING 


A  record  was  kept  of  the  analyses  of  all  coals  of- 
fered, as  shown  in  Figure  65.  On  the  reverse  side 
of  this  card  were  entered  the  name  of  the  firm  offering 


g 

0 

i 

o 

C5 

1 

o 

i 

"I 

1 

c     ^ 

1 

i 

i 

c 

1 

1  * 

^" 

a 

•oo 

^i 

(-4 

i 

I 

l 

. 

P 

-d 

a. 

(^       «^ 

c 

1 

O      ^ 

c8 

o 

c 
o 

H! 

* 

Oj 

'E, 

!§   ^ 

I 

'    £ 

00 

|  «  s  «"  S 

'S 

J 

! 

g 

ti 

i 

S     ».•      * 

3 

_l 

1 

1 

I     < 

"£ 

L 

1 

1 
s 

s 

^ 

«M 

i 

t, 

^ 

t 

a 

o 

a 

1 

•g 

^ 

^ 

I 

1 

s 

'3 

I  ; 

i 

! 

I 

j| 

^ 

1 

1 

00 
CO 

?S  • 

i 

« 

1 

1            1 

6 

I     c 

t  ' 
^ 

i 

^ 

|,            g. 

a 

1     . 

*  ^ 

1 

^            ^ 

« 
p 

i 

<y 

a 

the  coal,  quantity  available,  and  other  particulars  as 
shown  in  Figure  66.  Owing  to  the  difficulties  ex- 
perienced in  obtaining  the  requisite  quantity  of  coal 
of  the  most  desirable  grade  and  size  a  large  number 
of  offerings  had  to  be  examined  and  analyzed. 


PURCHASING    AS    PRACTISED 


181 


Figure  67  represents  the  method  of  advising  ship- 
pers of  the  weight  of  coal  discharged  from  barges  as 
recorded  by  our  own  scales. 

The  following  are  some  of  the  principal  forms  used 
in  operation  work,  and  from  the  description  of  the 
undertaking  in  the  preceding  pages  the  character  of 


Form  No.  1 
From 

Lou 

ELECTR 

T,l«phon.     \ 

•i.  (N-j-u,                               ENQUIRY. 

Jon  Electric  Railway. 

Office  of  the  Purchasing  Agent. 
Ta 

NUMBEH 

1C   RAILWAY    HOUSE. 
BROADWAY, 

WESTMINSTER,  S.W. 

lotoH.  6800. 

U   J*,-ri..ll..      !„  ,  t*n^4A. 

PLEASE  QUOTE  immediately  on  thle  form,  which  kindly  return  to  the  above  address, 
to  2  j:   settlement  discount,  monthly  account,  for  our  requirements  ae  under,  delivered  to  _ 

,       CARRIAQ 

,our 

oweat  price,  subject 

E    AND     PACKING     FREE. 

or  returnable  at  Vendor'e  Expense,  giving  earliest  delivery  date. 
ARTHUR  OHUROHIU, 

W.  *  8.  Ltd. 

Quantity. 

Description. 

Quotation. 

Delivery. 

Part  In 

Complete  by 

The  consideration  of  your  tender  le  likely  to  be  prejudiced  unleee  an  early  and   guaranteed  delivery   date   to 
stated,  and  we  reserve  the  right  to  cancel  any  balance  which  may  remain  undelivered  on  that  date. 

We,   the    undersigned,    hereby   offer   to   supply   The    London    Electric   Railway   with   the   a 

terms  hereon  named. 

Date                 _                       .                   Signed 

>ove   goods   on    the 

FIGURE  No.  69. — Form  of  inquiry  used  in  obtaining  quotations. 


182  PURCHASING 

the  purchases  and  what  they  implied  can  be  gathered 
without  detailing  the  processes  which  each  passed 
through.  The  legend  accompanying  each  illustration 
describes  briefly  the  form  and  its  uses. 


r«.K*t(.v»_^M). 

R*9.N»  
|            LON 

Of^M»No. 

DON    ELECTRIC    RAILWAY.                        10655 

OFFICE   OF  THE    PURCHASING    AGENT. 
ELECTRIC   RAILWAY.  HOUSE, 
BROADWAY,   WESTMINSTER, 

LONDON,  s.w. 

nMOMMIIM    AGENT 

TMMUM:.          ItaMnum.  v».  li...n. 
TiunwM  t-        VOTWU  i«oo  torn  :  ION  i  fxl 

To 

Please  supply  on  account  of  this  Company  .— 

i.    ALL  GOODS  TO  BE  DELIVERED 
TO 

*.    A  detailed  priced  invoice  in  duplicate,  baring  order  number,  to  be  rendered  immediately  on  despatch  of   the 

good's,  to  the  Purchasing  Agent,  Electric  Railway  House,  Broadway,  Westminster,  S.W. 
j.    AD  pattern!  must  be  returned  on  completion  of  order. 
4-    Accounts  paid  monthly  leas  .  J%. 

5.    V|««is9ittb«i4v|M«iM«w»li^|tosW4p«itMMBteMH««*im 

EXAMINED 

PURCHASING  ACINT. 

1-E.R. 

o^/frJLQfiSS- 

FIGURE  No.  70. — Official  order  form.  Used  in  quadruplicate,  the  original 
going  to  supplier,  one  copy  being  kept  in  the  purchasing  department, 
one  going  to  the  storekeeper,  and  one  to  the  department  making  the 
requisition. 


PURCHASING   AS   PRACTISED 


183 


0 

1 

I 

- 

! 

s 

£ 

a 

S 

(/> 

w 

ct 
111 

1 

1 

s 

I 

1 

I 

i 

*?? 

3 

S 

| 

S 

"d 

i 

(^ 

1 

E 

i 

1 

a. 

j 

i 

1 

i 

•s 

3 

1 

o" 

z 

i 

1l 

§ 

o 

^  1 

t 

?         0 

i 

•1 

i  I 

2 

184 


PURCHASING 


a: 

1' 

a 

{ 

O 

a 

.g 

1 

1 

D 

.2 

f 

§ 

j 

O 

1 

I 

S 

as 

TJ 

"a 

D 
• 

1. 

I 

1 

cc 

1 

O 

8 

g 

• 

p 

1 

o 

£ 

JO 

E 

I  « 

•1 

i 

co 

0 

1 
D 

i 

;        0 

C 

PURCHASING  AS  PRACTISED  185 


Deliveries 


Date 


Invoiced 


Remarks 


FIGURE  No.  73.— Reverse  side  of  "urge  card"  for  recording  shipments. 


186 


PURCHASING 


*• 

> 

I 

z 

i   S 

' 

0. 

?l 

s 

li 

J 

o 

0 

ii 

E 

1 

i! 

i 

°  i 

o 

UJ 

|        i                                       JS                      ^ 

E 

h 

-  i    d  I 

0 

LU 

Ul 

1  "»        §1 

1  1  J  I 

Hi     e 

^  *B    a     ^ 

o 

-         *  *  '  |:  .  I 

Q 

^                   2         i  1  * 

?  Z 

g                 «   -5     1 

i  0 

Jo     ^ 

:    J 

f 

I 

0             Is! 

& 

41 

i    i 

PURCHASING  AS  PRACTISED 


187 


g  , 

J* 

-+j 

.2 

0      \ 

CM      | 

J 

3 

i 

o     I 

1 

g 

0 

1 

s 

QQ      00 

1  ' 

1 

7     "^ 

8s 

g  s 

1 

I 

i 

^         ^J 

•2  !S 

i 

..._.. 

—  #. 

njim 

* 

JC  RAILWAY 

II8ITION  AND  RE 

nent  with  the  undermen 

-  



..... 

f-f 

«"» 

•a 

^ 

» 

jr.  The  original 
department  requ 

! 

i 

i 

I 

i 

Pi 

I 

6 

: 

N 

H 

1 

x< 

1 

4 

3|a 

! 

00  §* 

1s! 

o5  -2 

OJ     ^> 

z    i 

o 

2    Ii 

§  « 
|1 

m 

(S  1 

j. 

fOREKEEPER, 
Please  Supply 

•0 

Jpprowdfty. 

si 
II 

x                  to 

1           8 

i 

gs 

p 

2 

i 

fi 

188 


PURCHASING 


O 

.  'l 

!' 

{§   |  i 

rH      .• 

:  s 

•n 

? 

»•      c 

| 

- 

i    S 

^ 

&      1 

8 

i    8 

1 

1 

V 

? 

1 

£ 

6 

•o 

c 

0 

1 

s 

>« 

•*: 

I 

c 

1 

| 

1 

1 

1 

§ 

i 

u« 

c 

1 

t* 

E 

} 

i 

» 

i 

V 

^'          • 

Q 

§ 

JO 

>> 

gl 

o  2 

^  j    ,^S 

in 

S 

tlJ 

g 

).  472  (24/50-12-13).  [W.  *  S. 

LONDON  1 
RETURNS 

Storekeeper,  General  S 
E  Receive  from  

•< 

4 
I 

t 

sl 

PURCHASING   AS  PRACTISED 


189 


i 

| 

\ 

i 

i 

1 

I! 

i 

3 

3 

o 

C, 

.2 

I 

I 

3 

•8 

2 

j 

J2 

'< 

| 

i 

| 

8 

•*r< 

SIC  RAILWAY  COM 

! 

j 

<< 

"S 

ts 

1 

o 

1 

g 

M 

g 

u 

bO 

u 

I 

1 

.g 

2 

o. 

1 

h« 

Q 
O 

73 

1 

& 

1 

I 

j 

t>- 
t' 

T 

9 
?• 

i 

0 

^ 

0 

= 
4 
1 

< 
, 

h 

190 


PURCHASING 


il 


CHAPTER  XIII 

PURCHASING  FOR  A  MANUFACTURING  AND 
CONSTRUCTION  COMPANY 

AN  entirely  different  proposition  in  purchasing  from 
that  presented  in  the  last  chapter  is  involved  in 
buying  materials  and  supplies  for  a  large  corporation 
manufacturing  elevators,  escalators,  mine  hoisting  ma- 
chinery, etc.,  with  factories  located  in  widely  separated 
parts  of  the  country.  The  product  of  these  factories 
finds  its  way  into  every  civilized  country  in  the 
world,  besides  having  an  enormous  domestic  demand 
which  is  disposed  of  through  offices  situated  in  over 
eighty  of  the  principal  cities. 

The  business  of  the  undertaking  comprehends  not 
only  the  manufacturing  of  machines  and  apparatus, 
but  also  the  erection  of  them,  and  the  construction  of 
the  appurtenances  necessary  for  their  complete  instal- 
lation. 

A  service  department  is  also  maintained  which 
comprises  the  work  of  inspection,  repair,  upkeep,  and 
maintenance  of  elevators  already  erected,  and  the 
furnishing  of  necessary  supplies.  It  undertakes  the 
reconstruction  of  old  and  partially  obsolete  instal- 
lations, to  bring  them  into  conformation  with  the 
latest  developments.  The  constant  additions  which 
are  being  made  to  the  building  laws  in  cities  and 
the  various  state  requirements  governing  factory 
buildings  add  considerably  to  the  functions  of  this 
department. 

191 


192 


PURCHASING 


It  can  readily  be  conceived  that  the  purchasing  con- 
nected with  the  multitudinous  activities  of  such  a 
concern  is  a  complex  problem  and  one  involving  an 
enormous  amount  of  detail.  The  writer's  association 


RCQ.    NO                      _ 

OTIS  ELEVATOR  COMPANY 

DATE                                    "»' 

ACCOUNT   NO. 

Ct-ASS 

o 

J 

< 

z 

0 

0 

o 

SHIP  VIA                                                                  ASSEM.   IN   STOCK                                TOTAL   AVAILABLE    , 

FIN.     IN    STOCK    A    RFf.'n    RINrC                                      AUT. 

NFFOFO  ON  ORDFRB  .   ....    TOTAL   "«n 

REMARKS 

FORM  971 

FOR  MANUFACTURING   DEPT.                                                                     FOR  WORKS 

FIGURE  No.  79. — Requisition  from  factories. 


PURCHASING  AS  PRACTISED  193 

with  this  work  is  an  interesting  and  pleasant  experi- 
ence and  some  of  the  methods  used  are  related  here 
and  may  be  of  service  to  the  reader. 

The  operations  of  the  company  covering  such  a  wide 
area  naturally  entail  the  complete  separation  of  all 
traffic  work  from  the  purchasing,  and  it  is  a  distinct 
and  important  department  comprising  many  functions 
in  no  way  connected  with  the  purchasing  depart- 
ment. In  fact,  its  principal  work  is  related  to  ship- 
ments made  on  account  of  the  sales  department. 
It  cannot,  therefore,  be  considered  as  an  integral  part 
of  the  purchasing  activities.  An  illustration  will  be 
given  in  the  next  chapter  where  traffic  work  is  con- 
fined practically  to  purchasing  alone  and  forms  a 
constituent  part  of  that  department. 

The  stores  system  is,  similarly  to  the  traffic  work, 
segregated  from  the  purchasing  department  and  per- 
forms its  important  functions  independently.  The 
operations  of  this  purchasing  department  therefore  are 
confined  to  buying,  and  the  methods  employed  are 
in  contrast  to  the  other  examples  given. 

The  requisitions  from  the  factories  are  shown  in 
Figure  79.  This  form  is  sufficiently  clear  and  needs 
no  explanation;  the  arrangement  and  wording  convey 
to  any  person  with  only  a  rudimentary  knowledge 
of  what  a  requisition  is,  its  import  and  meaning.  It 
has  to  be  properly  authenticated  by  the  parties  in 
authority  and  when  thus  validated  forms  the  purchas- 
ing agent's  authority  for  placing  the  order. 

Another  form  of  requisition  is  shown  in  Figure  80. 
This  is  used  by  all  the  departments  of  the  undertaking 
not  connected  with  the  actual  manufacturing,  for 


194  PURCHASING 

supplies  used  by  the  construction  and  service  depart- 
ments and  in  the  offices. 

The  purchase  order,  Figure  81,  is  in  quadruplicate, 


REQUISITION  ON 


PURCHASING   DEPARTMENT 


REO    No 


DATE 


FIGURE  No.  80. — Department  requisition. 

the  original  going  to  the  seller,  one  copy  being  kept  in 
the  purchasing  department,  one  going  to  the  factory, 
and  one  to  the  receiving  department.  The  copy  re- 
tained in  the  purchasing  office  is  filed  in  a  post  binder 
and  on  it  are  recorded  the  invoices.  It  should  be  men- 
tioned that  the  copy  going  to  the  receiving  department 
has  on  the  reverse  side  an  arrangement  for  recording 
the  receipt  of  the  goods  (see  Figure  82)  and  is  retained 
in  that  department  until  the  order  is  completed,  when 
it  is  attached  to  the  invoice.  If  more  than  one  in- 
voice is  rendered  against  an  order  a  supplementary 


PURCHASING   AS  PRACTISED 


195 


form  is  used  for  recording  receipt  of  material  which 
is  attached  to  each  invoice  as  they  arrive.  The  final 
invoice  completing  the  order  is  accompanied  by  the 
form  shown  in  Figure  No.  82. 


o 

O  I 


o 
o 


ORIGINAL  PUT  THI» 

OTIS  ELEVATOR  COMPANY  ORDER  No    B   55290 

ELEVENTH     AVENUE     AND  °N     V°U" 

TWENTY-SIXTH     STREET  INVOICE 


NEW  YOBK 


M 


PLEASE     DELIVER    TO    OTIS    ELEVATOR    COMPANY 


SHIP  VIA 

PLEASE  NOTE! 


OUR  ORDER  NUMBER  MUST  API1 
'  L.ADINO  AND  THE  PLACE  TC 
1  STATED  ON  INVOICE. 

•END    INVOICE    TO    THIS    OFFICE, 


OTIS    ELEVATOR    COMPANY. 


FIGURE  No.  81. — Purchase  order. 


196 


PURCHASING 


Contracts  are  made  for  fixed  periods  by  the  pur- 
chasing agent  in  New  York  for  all  materials  which  can 
be  bought  to  advantage  in  this  manner.  Purchase 


MOTlCEl    A 

1 

0 
0 

o 
o 

FORM 

*Z3. 

j 

M.RROVAI.  MUST  BE   BY  MOR    OR  SUPT.  OR  ONE  DULY 

APPROVED 

•.UTHOR.ZED. 

FIGURE  No.  82. — This  is  the  reverse  Bide  of  copy  of  order  which  is  sent  to 
receiving  department. 


PURCHASING  AS  PRACTISED 


197 


orders  are  issued  both  in    New  York  and   by   the 
branch  offices  which  apply  on  these  contracts. 
The  order  form  used  by  the  branch  offices  is  shown 


u«v.«  "„!£....» 

OTIS  ELEVATOR  COMPANY 

PURCHASE    ORDER 

orriCB                                                                                                                  OAT« 

PI-CASE     D6LIVEB    TO                                                                                                                                                  FOP 

0 
0 

•V                                                                                                                                                                                                        NO. 

QUANTITY    AND   DESCRIPTION   OF    GOODS   WANTED 

_J 

5 

OC 
0 

0 

0 

\ 

ORDERED   BY                                                                                                             APPROVED  BY 

FIGURE  No.  83. — Purchase  order  form  used  by  branch  offices. 


198 


PURCHASING 


in  Figure  83.  If  the  concern  with  whom  the  contract 
is  made  has  local  stocks  in  the  cities  where  branch 
offices  are  located,  the  material  is  supplied  from  there, 


OTIS  ELEVATOR  COMPANY 

PURCHASING    AGENT 
NEW  YORK 

REQUEST 
FOR 
QUOTATION 

TOTAL 

REQUISITION 

/>U«CH»S«  Oaoc* 

No 

FIGURE  No.  84. — Form  used  in  obtaining  quotations. 


PURCHASING  AS  PRACTISED  199 

or  from  the  nearest  shipping  point.  A  copy  of  this 
order  is  sent  to  the  purchasing  department  in  New 
York,  where  a  record  is  kept  of  the  total  amount  of 
material  obtained  on  account  of  the  contract. 


FOLLOW  UP  ON  MATERIAL  ORDERS 

TO  DATE • 


PLEASE  ADVISE   BELOW   WHEN 


YOU       WILL       SHIP      MATERIAL 

SPECIFIED      ON       OUR      ORDER  *      YOUR    NO 


DATE 


OUR    NO 


SHOP  NO. 


OTIS  ELEVATOR  COMPANY 


.OFFICE 


REPLY  (DO  NOT  DETACH  FROM  ABOVE) 


WE  WILL   FURNISH    ABOVE    MATERIAL 


SIGNED. 


FIGURE  No.  85. — This  form  is  used  in  following   up  orders  and  obtaining 
from  sellers  information  as  to  date  of  shipment. 


200  PURCHASING 

The  branch  offices  are  advised  of  all  contracts 
made,  and  all  changes  and  modifications  which  take 
place  from  time  to  time.  As  they  are  engaged  in 
local  erection,  construction,  and  repair  work,  it  is  an 
important  advantage  for  them  to  be  able  to  secure 
the  benefits  of  these  contracts.  They  are  placed 
in  the  same  position  as  the  largest  buyers  for  such 
material  as  they  need  locally  and  which  can  be  cov- 
ered by  agreements  of  this  kind.  Contracts  of  this 
character,  which  can  be  arranged  by  the  purchasing 
agent,  are  important  factors  in  the  general  economic 
operation  of  the  corporation's  undertakings. 

The  invoices  for  all  factory  purchases  go  first  to 
the  purchasing  department  in  New  York,  where 
they  are  compared  with  the  order  and  sent  to  the 
factories  for  approval.  A  record  of  the  receipt  of 
material  is  made  by  the  receiving  department  on  the 
reverse  side  of  their  copy  of  the  purchase  order  (see 
Figure  82).  This  copy  of  the  order  is  then  attached  to 
the  invoice  and  returned  to  the  purchasing  department. 
It  will  be  noticed  that  Figure  82  covers  all  the  necessary 
data  connected  with  the  invoice,  such  as  classification, 
freight  charges,  etc.  A  slip  is  attached  to  invoices  call- 
ing attention  to  cash  discounts,  and  each  person  handling 
them  must  perform  his  work  to  enable  payment  to  be 
made  on  date  specified.  After  prices  have  been  checked, 
the  invoices  are  passed  to  the  accountant's  office. 

These  are  the  salient  features  connected  with  the 
purchasing  system  of  this  undertaking.  There  are  many 
details  associated  with  it,  as  there  is  with  any  similar 
work.  There  are  also  forms  used  between  the  fac- 
tories, branch  offices  and  purchasing  department  which 
it  is  unnecessary  to  give  here. 


PURCHASING   AS   PRACTISED 


201 


/I 


s/ 


Sis 


n 


I' 


CHAPTER  XIV 

PURCHASING  FOR  CONSTRUCTION  WORK  AND  OPERATION 
OF  PROPERTIES  IN  WIDELY  SEPARATED  LOCALITIES 

THERE  are  conditions  existing  in  the  work  of 
purchasing  which  are  not  covered  by  the  de- 
scriptions given  in  either  of  the  two  preceding  chap- 
ters. As  pointed  out  in  earlier  portions  of  this  book, 
there  are  certain  fundamental  principles  connected 
with  buying  which  are  common  to  it  whenever  and 
wherever  its  functions  are  exercised.  The  methods 
employed,  however,  have  to  be  adjusted  to  meet 
the  varying  conditions  which  surround  the  work. 

The  writer  has  in  mind  one  of  the  largest  engineer- 
ing concerns  in  the  country  with  whose  purchasing 
he  had  the  good  fortune  to  be  connected.  This 
company  has  carried  out  construction  contracts  in 
practically  every  state  in  the  Union,  also  in  Cuba, 
Central  America,  the  Philippine  Islands,  and  its  allied 
companies  have  executed  contracts  in  all  parts  of 
the  world. 

They  also  act  as  managers  and  operators  of  public 
utility  undertakings  and  many  other  enterprises,  both 
at  home  and  abroad.  In  addition  to  these  important 
functions,  there  are  many  companies  who  find  it 
advantageous  to  employ  them  to  act  as  purchasing 
agents  for  them  on  account  of  the  excellent  facilities 
they  possess  for  satisfactorily  taking  care  of  such 
work, 

202 


PURCHASING   AS   PRACTISED  203 

From  this  short  resume  of  the  activities  of  the  cor- 
poration, it  can  be  easily  understood  that  the  work 
of  purchasing  all  the  requirements  connected  with 
so  many  undertakings  is  an  exceptionally  intricate 
problem.  The  proper  performance  of  the  work  of 
buying  where  the  conditions  and  circumstances  vary 
so  greatly  involves  something  radically  different  from 
the  examples  given  in  the  two  last  chapters. 

The  information  which  reaches  the  purchasing  office 
and  which  primarily  forms  the  basis  for  the  purchase 
may  be  in  a  very  incomplete  and  crude  form.  This 
necessitates  the  apportioning  of  the  work  connected 
with  the  requisition  to  an  experienced  man,  who  takes 
all  the  information  furnished  and  beats  it  into  shape. 

The  requisition  form  used  (see  Figure  87)  is  much 
larger  than  those  previously  shown,  and  the  clerk 
in  charge  has  to  write  up  the  requisition  specifying 
and  minutely  describing  every  detail  and  particular 
requisite  to  insure  the  purchase  being  made  and  the 
material  shipped  exactly  in  accordance  with  the  re- 
quirements of  the  customer  for  whom  they  are  acting 
as  purchasing  agents,  or  as  needed  for  the  execution 
of  work  on  contracts  for  construction  or  operation. 

In  considering  a  requisition  such  as  this,  the  nature 
and  character  of  the  purchases  as  already  outlined 
must  be  taken  into  consideration.  It  is  a  foregone 
conclusion  that  when  the  material  is  to  be  shipped, 
perhaps  half-way  round  the  world,  special  care  must  be 
taken  in  making  the  purchase  and  having  every  detail 
connected  with  it  and  its  shipment  absolutely  correct. 

All  the  work  connected  with  traffic  problems  in  this 
establishment  is  an  integral  part  of  the  purchasing 
department,  and  all  the  particulars  as  to  manner  of 


204 


PURCHASING 


packing,  routing,  etc.,  have  to  be  decided  by  the 
traffic  clerk  if  not  unequivocally  specified  by  the  con- 
signee, and  even  then  is  subject  to  this  checking  and 
approval. 


6               6       . 

THF   1    ft  WHITF  rNGlNrFRING  mfiPOftATinN                        ..*.*..*        ^ 

PURCHASE    REQUISITION. 

ACQUISITION 
TO     MANAOfcn     Or     ruftCMA«C« 

CNGINCCNS.     CONTMACTOH* 

COHTHACT 

,..„.  o.«.  l«   _oWIMO  ~m,~  ro  

i:.°;» 

.r^ 

MO. 

OUANTITT 

T.T.  '-XFySUSZ.  •fS?HZgrn<* 

DCLIVCJV 

AT 

DATE 

ffSSfn 

CHICKED    •» 

CMA**M«  O 

FIGURE  No.  67. — Requisition  form. 


PURCHASING   AS  PRACTISED  205 

Trivial  purchases,  such  as  frequently  occur  in  local 
construction  and  manufacturing  work,  are  not  as 
general  in  transactions  of  this  purchasing  department, 
but  they  are  large  and  important  and  practically  all 
of  them  are  subject  to  inspection  when  shipments  have 
to  be  made  great  distances.  It  is  easily  conceivable 
that  there  must  be  positive  safeguards  against  ship- 
ping wrong  material,  and  an  endeavor  has  been  made, 
therefore,  to  show  the  necessity  of  preparing  the  requi- 
sitions so  that  all  questions  as  to  proper  description 
of  material,  its  inspection  and  routing  are  adequately 
covered  and  accurately  specified. 

In  an  office  handling  such  a  varied  assortment  of 
purchases,  the  information  on  file  is  naturally  exten- 
sive and  diversified.  It  is  not  possible,  however,  nor 
could  it  be  expected,  that  the  department  should 
know  where  to  buy  to  the  best  advantages  everything 
embraced  in  its  multitudinous  activities.  Neverthe- 
less, it  must  be  in  a  position  to  obtain  at  short  notice 
such  information  as  is  essential  to  enable  it  to  make 
the  purchase  intelligently  and  satisfactorily  of  any- 
thing unusual  which  it  is  called  upon  to  buy.  As  an 
illustration,  the  writer  remembers  having  to  investi- 
gate and  find  a  market  in  which  to  purchase  machin- 
ery for  harvesting  rice  and  hemp  and  preparing  them 
for  commercial  use.  This  transaction  was  for  the 
Philippines,  while  at  the  same  time  mules  were  being 
bought  for  construction  work  in  Tennessee  and  loco- 
motives for  Cuba. 

In  its  completed  form  and  when  properly  approved, 
the  requisition  is  ready  to  be  dealt  with  by  the  pur- 
chasing agent,  who  scrutinizes  it  closely,  for  the 
magnitude  and  importance  of  the  expenditures  in- 


206  PURCHASING 

volved  would,  as  already  pointed  out,  entail  severe 
losses,  trouble,  and  inconvenience  to  both  the  pur- 
chaser and  the  consignee  if  the  transaction  was  not 
properly  carried  through  in  consequence  of  the  requi- 
sition being  carelessly  or  incorrectly  written  up. 

It  is  necessary  also  to  verify  the  authorization  of 
the  purchase,  and  that  it  is  validated  by  the  existing 
agreements  or  arrangements  for  carrying  out  con- 
struction work,  management,  or  operation  of  properties, 
or  in  the  performance  of  the  function  of  purchasing 
agent  for  corporations  who  have  not  got  the  requisite 
facilities  for  doing  such  work  to  the  best  advantage. 

The  requisition  is  then  handed  to  the  price  clerk 
who  writes  up  and  sends  out  the  invitations  to  ten- 
der. The  work  in  connection  with  this  phase  of  the 
purchase,  also  in  comparing  quotations  and  final 
negotiations  before  placing  the  order,  does  not  differ 
materially  from  similar  work  as  related  in  previous 
chapters.  This  is  also  the  case  with  all  the  features 
pertaining  to  the  following  up  of  the  order,  inspecting 
of  the  material,  and  shipment  to  customer. 

A  few  of  the  forms  used  in  carrying  through  the 
routine  work  of  the  department  are  illustrated  in  the 
following  pages.  The  nature  of  the  particular  section 
of  the  work  in  which  they  are  used  can  readily  be 
gathered  from  an  examination  of  the  forms  them- 
selves and  it  is  not  necessary  to  detail  the  method  of 
handling  each  one. 

The  system  of  filing  the  papers  in  one  of  the 
transactions  of  the  character  described  has  to  be 
radically  different  from  that  used  by  the  Underground 
Railways,  where  over  one  hundred  orders  were  fre- 
quently issued  in  one  day,  many  of  them  having  no 


PURCHASING   AS  PRACTISED 


207 


TK  J.  (.  MUTE  EMIIEEnllG  CORrWTIOI, 

ENOINB«R»     CONTRACTOR*. 
43     EXCHANGE     PLACE       NEW     YORK.     N.     1 

ORDER 


1C  shipment  cannot  I 


Invoice,  as  specified  below,  must  b*  «cni  to 
this  office  as  soon  as  material  is  .hipped  from 
your  works.  All  good*  from  manufacturers 
in  (irealer  New  York.  sh-inM  be  held  pending 
receipt  at  shipping  instructions. 

All  material  furnished  .must  conform  with  our 
SPECIFICATIONS  when  Indicated.  awl  if  not 
In  accordance  therewith.  iame  wfll  b«  held  at 
yoar  risk.  awaiting  disposition.  Shippers 
must  pay  all  transportation  charges  both  ways 
on  all  rejected  material. 


age  or  damage  will  be  charged  to  shipper 
7      No  charges  allowed  fnr  packing,  reels  or  cartage 
unless  specified  on  this  order. 


9.  No  drafts  will  be  honored. 

10.  Railroad  hill  la.linj;  sho»,n5  proper  classifi- 

cation,   full    rouliui;.   car    miraljer.   weights 
and  rates  must  l>c  sent  to  (as  indicated  at 


»OU»*     V««T 


TK  J. «.  WIITt  OOKltm  OMMK 


RECEIPT  Of  THE  ABOVE  ORDEH  I*  MCMC.V  ACKNOWLf  Dw«O.          W*  ACCCFT  TM«  OWOWI  A«  •PECIF1KC 


FIGURE  No.  88. — Purchase  order  form. 


208 


PURCHASING 


papers,  correspondence,  or  documents  connected  with 
them  to  be  preserved.  But  with  such  orders  as  these 
the  number  is  comparatively  small,  but  frequently 
includes  a  voluminous  quantity  of  correspondence, 


Form  E  XX 

HEO      NO 
MATERIAL 

mot* 

W    ICMVI-U 

THE  J.  G.  WHITE  ENGINEERS 

ENGINEERS.     CONTRA 
43    EXCHANGE    PLACE.    NEV 

COPY    OF    O 

CTORS 

RDER 

MAS  BCCM  OPnrBto 

COHMGNC 

Ou- 

OMMMi 

CEMCMAt.  CLASSIFICATION  

CT- 

SHIPMENTS     MADE 

«^__.__ 

~VT,JCO;         ,",.".«.          ovr-    —""" 

*""" 

o 

0 

FIGURE  No.  89.— Copy  of  purchase  order  retained  in  oflQce  showing  method 
of  recording  invoices. 


PURCHASING  AS  PRACTISED  209 

memorandums,  quotations,  etc.,  which  for  easy  refer- 
ence must  be  kept  together.  Therefore  all  papers 
relating  to  the  order,  together  with  requisition,  from 


THE  J.  8.  WHITE  EIEIIEEI1II  COHPOUTIOI 

ENGINEER*   CONTRACTORS 
43  EXCHANGE  PLACE 


19 


GBKTUMBNi 

ORDER  Na — CONTRACT 

PU»M   r.f.r   to    Mr  order  of  th.  tbov.   number  u»d    pUc.   h«reon,   in   .p»c.  .llotl, 
IT**  ».ry    be.t    quol.Uon    covering    ih.    item,    included    in    Ike    order. 

Your.  T«7  «nJy. 

TNC  I.  &  WHITE  EJKMEUMfi  CO»POIATiO» 

f .  ft.  CMILSON 


THE  J.  0.  WHITE  ENGINEERING  CORPORATION 
GENTLHUENl 

We    quote    below    ear    rery    belt    price,    cove-inf     the    item>    rneotioned    on   y« 


FIGURE  No.  90. — When  an  order  has  been  issued  without  first  ascertaining 
the  price,  this  request  is  sent  to  the  party  holding  the  order. 


210  PURCHASING 

the  initial  stage  to  its  final  completion,  are  kept  in  a 
folder.     Such  a  scheme  is  not  feasible  or  practicable 


Form  No.  313A  500.  12'J-IO 

Prints  and  Specifications  to  be  sent  out 

To  ENGINEERING  DEPARTMENT  Date Number. _ 

Order  has  been  placed  with „ 

For , _. 

To  be  used  on  the _ job 

Please  see  that  all  the   Prints  and  Specifications  covering  this 
work  are  sent  immediately. 


Purchasing  Department. 


Domestic  Prints 

To  PURCHASING  DEPARTMENT                                     Number. 
Prints  and  Specifications  have  been  forwarded  to _ 


For 

To  be  used  on  the „_ . job 


Date 

Engineering  Department 


FIGURE  No.  91. — When  an  order  is  placed  which  requires  blue  prints  and 
specifications  this  form  is  sent  to  the  engineering  department. 


PURCHASING   AS   PRACTISED  211 

when  very  large  numbers  of  orders  are  issued  which 
have  few  or  no  papers  connected  with  them  to  be 
preserved. 


HO.   JIT.      2M-4- 12-11. 


INSPECTION  NOTICE 

CONTRACT , ORDER    No. 

ENGINEERING   DEPARTMENT 

OFFICE  DATE 


MANUFACTURER   ADVISES  THAT   MATERIAL   ON   THE   ABOVE 

ORDER  WIL,5  BE  READY  FOR  INSPECTION  AT 

_ „ _ DATE 

PURCHASING  DEPARTMENT 


INSPECTION  NOTICE 

CONTRACT _ ORDER    No..... 

PURCHASING   DEPARTMENT 

OFFICE  DATE  


WE     WILL   ARRA,J!vE  F°R    'NSPECTION    OF    MATERIAL     ON     THE 
ABOVE    ORDER.  ENGINEERING     DEPARTMENT 


BY 


FIGURE  No.  92.— When  inspection  has  been  specified  on  order,  this  form  is 
sent  to  engineering  department. 


212  PURCHASING 


THE  J.  t.  WHITE  EieiREEXin  CORPOIUTIOH 

ORDER    TRACER.  4S  «CH»NOE  n*ct, 

NEW  YORK 

NEW  YORK 


RUSH 


ORDER  NO CONTRACT 

IMMEDIATELY  WHEN  YOU  PROPOSE  I 


YOURS  VIRY  TRULY. 

E.  N.  CHILSON 
.  PLEASE  ADVISE:  MANAOKR 


ATE  OP  SHIPMEh 


CAR  INITIAL*  AND  NUk 


FIGURE  No.  93. — Form  used  in  requesting  information  regarding  shipment 
of  order. 


PURCHASING  AS  PRACTISED  213 


MEMORANDUM 

TO 
ORDER  FOLLOW-UP   CLERK 


1  LETTER 

ORDER  WAS  PLACED  *{  BY  TELEPHONE 


(  BY  LETTER 
<  BY  TELEPH' 
(  VERBALLY 


DATE- 


WlTH. 


MATERIAL 


CONTRACT. 


SHIPMENT  DUE- 


SIGNED. 


COVERED  BY  ORDER  NO. 
FOLLOW  UP  RECORD 


FIGURE  No.  94. — When  an  order  has  been  placed  verbally  and  before 
the  official  order  is  issued,  this  form  is  used  for  temporary  follow-up 
purposes. 


214 


PURCHASING 


MEMORANDUM   FOR    FIELD  OFFICE 


CON.TXUCTIOM    OFFICt 


GENTLEMEN 

Order  No_ 


Shipment   of  mitt  rial  covered  by  our  order  of  the  above  number  hat  becD   ,££&» 
as  followi:— 


FIGURE  No.  95. — Advice  to  construction  office  regarding  shipment  of  material. 


THE  J.  I.  WHITE  EN6I»EEBI»6  CORPflRlTIOK 


41  IXCHANOC  PLACC 


191. 


To 


Please  deliver  to  S.S. 
now  loading  at 


.for  shipment  to. 


Please  have  all  packages  marked  in  full,  as  per  In- 
structions given  In  our  order,  take  receipt  in  our  name  and  for-x 
ward  to  us  when  delivery  has  been  made. 

Please  number  packages  as  follows: 

"Yours  truly, 

Manager  of  Purchases. 


FIGURE  No.   96. — Advice  to  supplier  regarding  shipment  of   an  order  by 
steamship. 


PURCHASING  AS  PRACTISED 


215 


:  J.  I.  WHITE  EI8IIEEIIII  CORf-CUIlM 


IMPORTANT 


TRACER     REQUEST 


PLEASE    WIRE    TRACE    SHIPMENT 


BY    CONSIONEE    UNDER    OATI  OF_ 


THAT  *MIPMENT   MA*    NOT   YET   BEEN    RECEIVED.  PLEASE    ADVISE    IMMEDIATELY 


r-BILLING    REFERENCE*.   CONNICTINO    LINE*. 


Vtr,   Irulr   Tour., 

THf  ).  fr  WHITE  HemCERING  CORPO«»TIOII 

C.  N.  CHIL*ON.  HAMAOI 


FIGURE  No.  97. — Tracer  request.  One  of  the  forms  used  by  the  traffic  clerk. 


216  PURCHASING 


Form  No.  32n  1-22-13 


THE  J.  G.  WHITE  ENGINEERING  CORPORATION 

ENGINEERS    CONTRACTORS 
«X  EXCHANGE   PLACE 
NEW  YORK 


PURCHASING  DEPARTMENT 


.19 


ORDER  No. CONTRACT- 

We  return  herewith  jour  invoice!  as  follows: 
Number  Date 


Please  follow  invoicing  instructions  on  order  of  the  above  number,  forwarding 
and  copies  la  accordance  therewith. 


JHI  j.  a  wmrt  CN6mt»im  COIPOIATKM 

C.  N.  CHILSON 


FIGURE  No.  98. — When  invoices  are  not  rendered  in  accordance  with  instruc- 
tions they  are  returned  with  this  notice. 


PURCHASING  AS  PRACTISED  217 


MEMORANDUM  FOR  FIELD  OFFICE 
INVOICES 

DATI. 


CONSTRUCTION  OFFICE 


GENTLEMEN  : 

ORDER  No - - CONTRACT. 


We   attach    hereto 


Discount  of %  ipplie*  if  payment  it  m.dc  within 


Vtry  truly  youn, 

E,  N.  CHILSON 


FIGURE  No.  99.— Form  used  in  sending  invoices  to  construction  offices  for 
approval. 


218 


PURCHASING 


J 

5 

2 

X 

c 

COMPLETED 

Ik 

2 

° 

1 

1 

* 

1 

0> 

2 

>* 

0 

8 

7 

8 

o 

I 

w 

- 
p 

§ 

o 

•- 

£ 

iz 

i 

V* 

0 

o 

I 

o 

5 

1 

• 

s 

II 

i 

1 

I 

S 

1 

I 

PURCHASING  AS  PRACTISED 


219 


a 

0 

z 

il 

I 
z 

si 

•0 

<  "= 

c 

1 

ORDER  NO. 

<C  o 

i! 

P 

5 

r 

i 

i 

1 

o 

,_ 

A 

Q 

\ 

> 

< 

s 

Z 

i-H 

c> 

B 

Jz; 

0 

9 

I 

1 

o 
fi 

n 

2g 
II 

II 

i 

ss 

1 

-Ir 

If 

If 

' 

CHAPTER  XV 

PURCHASING  FOR  A  SMALL  MANUFACTURING  PLANT 

IN  a  small  manufacturing  plant  the  conditions 
surrounding  the  purchasing  and  store  keeping  differ 
somewhat  from  those  previously  related.  The  fol- 
lowing brief  explanation  will  serve  to  illustrate  the 
main  features  of  the  system  adopted.  Owing  to  the 
size  of  the  plant  and  the  limited  amount  of  clerical 
assistance,  it  had  to  be  simple  in  the  extreme  and 
yet  meet  the  problems  of  purchasing  and  store  keeping 
satisfactorily.  On  this  account  the  forms  used  were 
limited  in  number  and  any  features  which  might 
lead  to  complications  or  enlarge  the  work  were 
avoided. 

The  storeroom  was  in  charge  of  a  man  who  was 
honest  and  reliable,  but  who  was  not.  capable  of  keep- 
ing any  of  the  stores  accounting  records,  which  were 
all  kept  in  the  main  office.  He  had  no  authority  to 
issue  purchase  requisitions,  he  received  material  and 
supplies,  stored  them,  and  delivered  them  on  fore- 
men 's  requisitions  as  required,  doing  the  physical  work 
himself  with  an  assistant.  If  any  additional  tempo- 
rary help  was  needed  it  was  drawn  from  the  shop. 

When  a  production  order  was  issued,  the  superin- 
tendent or  his  assistant  made  out  a  purchase  requisi- 
tion, Figure  102,  for  the  material  required.  This  was 
in  duplicate  and  both  original  and  copy  were  sent 
to  the  office.  Here  it  was  checked  up  with  the  stores 

220 


PURCHASING  AS  PRACTISED 


221 


G 

Z 

hi 

Z 
0 

6             Q            2 

z        c       o 
z        °       £ 

J 

h 

0) 

0           w 

p        10       o 

<            U 

!2        i       c 

ERIA 

0 

u 

z 
• 

D 
0 
UJ 

D            0           U 

UJ             D           H 
C            Q.           0 

h 
I 

isition. 

o: 

IL 
0 

81 

HASE 

RIPTION 

—Purchase 

O 

o: 

0 

0) 
Ul 

8 

D 

0 

6 

Q. 

H 

P 

g 

| 

o      Q 

b,           U 

1- 

0          z 

hi     < 

„ 

K          > 

o 

UJ           D           U 

I 

H           0           1- 

K 

<           Ul           < 

0 

k. 

Q         tt         Q 

o    o                   o    o 

222 


PURCHASING 


perpetual  inventory  to  see  whether  any  of  the  mate- 
rial in  stock  could  be  used  for  this  order.  It  was  then 
numbered  with  an  automatic  numbering  stamp  and 
investigations  were  made  as  to  prices,  etc.  After 
the  order  was  placed,  the  original  was  kept  in  the  of- 
fice and  the  copy  returned  to  the  superintendent. 
On  both  of  them  the  order  number  and  name  of  seller 
were  inserted.  This  fitted  in  better  with  the  super- 
intendent's method  of  keeping  his  records  than  if 
a  copy  of  the  purchase  order  had  been  sent  to  him, 
which  would  only  have  meant  to  him  an  unnecessary 
addition  to  his  clerical  work. 

Requisitions  for  supplies  for  the  shop  were  issued 
by  the  superintendent's  assistant  when  he  was  notified 
by  the  office  or  by  the  storekeeper  that  the  stock  was 
running  low  and  had  reached  the  limit  fixed.  When 
new  machinery  was  designed,  the  drafting  room  made 


FORM    12B 

MATERIAL- 

PURCHASED    FROM 

DATE 

ORDER 
NO. 

DESCRIPTION 

PRICE 

PER 

FIGURE  No.  103. — Card  for  recording  prices  of  material  with  names  of 
suppliers  and  order  numbers. 


PURCHASING  AS  PRACTISED 


223 


out  a  bill  of  material  and  a  requisition  for  it  at  the 
same  time.  These  requisitions  came  into  the  office 
and  were  dealt  with  in  the  same  manner  as  those 
from  the  superintendent. 

A  record  of  quotations  and  prices  paid  for  previous 
purchases  was  kept  on  a  card  index,  Figure  103. 
Reference  was  made  to  this  to  ascertain  the  latest 


to 

^~ 

0 

T— 

z 

6 

6 

O               z 

u 

c 

z 

—                        H 

0 

O 

3 

u 

u 

Z 

^ 

P          S 

rv 

U  Z 

g 

o          2 

l\ 

fc 

(£       . 

• 

h     z 

K 
M  k. 

o 

(/)      Z 

00 

Z      O 

5? 

i 

o   ° 

0  > 

'     i 

• 

*   E 

0 

£ 

so 

1 

S 

O                                                                                                                                                i-  * 

rH 

z 

z                                                                                                           ij 

I 

i                                                                                  S" 

O                                                                                                                                                                                             MM 

0 

0             n 

J                                                                                                                                                                                KB 

" 

<               h 

Z          = 

Z  Z 

£< 

g 

iz 

2 

K 

5 

m 

o 

O 

a 

Z    y 

:       ; 

0    ? 

!       ! 

i 
( 

i  t- 

1 

Z 

0 

0                                      00 

224 


PURCHASING 


price  and  if  no  recent  quotations  had  been  received, 
inquiries  were  sent  out  for  best  prices  and  shipping 
dates.  When  a  satisfactory  price  had  been  secured 
and  shipment  promised  early  enough  for  the  proper 
execution  of  the  production  order,  the  regular  pur- 
chase order  was  issued,  Figure  104.  A  copy  of  this 
order  was  sent  to  the  storekeeper  (no  price  was  in- 
serted on  this  copy);  a  copy  was  also  kept  in  the 
office  and  bound  in  a  metal  post  binder. 

When  the  invoice  was  received,  it  was  checked 
with  the  order  and  a  memorandum  of  the  date  of  in- 
voice, quantity  shipped,  and  amount  of  invoice  was  en- 


FORM      106 
FROM 


QUANTITV 
RECEIVED 


DESCRIPTION     OF    MATERIAL. 


RECEIVED     AS     ABOVE 


QUALITY     APPROVED 


PRICE     EXAMINED 


EXTENSIONS     CHECKED 


CHARGE     TO 


AMOUNT 


STOCK     RECORD 


APPROVED 


FIGURE  No.  105. — Approval  form  for  invoices. 


PURCHASING  AS  PRACTISED 


225 


tered  on  the  face  of  the  copy  of  the  order  in  the  office. 
This  was  found  an  effectual  check  against  approving 
two  invoices  for  the  same  material.  It  also  pre- 
vented more  goods  being  delivered  than  the  order 
called  for.  These  are  two  things  which  need  close 
watching  in  both  small  and  large  establishments.  It 
is  a  practice  of  the  accountants  for  large  concerns 
to  take  all  properly  approved  invoices  and  make  a 
voucher  for  them.  They  may  have  no  effectual 
means  of  detecting  or  knowing  that  two  of  them 
are  duplicates.  It  is  entirely  up  to  the  purchasing 
agent  to  prevent  this  with  proper  safeguards.  In 
a  small  business  the  same  trouble  occurs  because 
the  bookkeeper  takes  all  invoices  as  they  are  ap- 
proved and  enters  them  in  his  ledger  irrespective  of 
dates.  At  the  end  of  the  month  a  pay  statement 


FIGURE  No.  106. — Index  card  for  orders,  the  supplier's  name  being  inserted 
at  the  top. 


226  PURCHASING 

with  list  of  invoices  is  made  out  and  not  being  in  order 
of  dates  it  is  not  noticed  that  there  are  two  invoices 
of  the  same  date  and  amount.  The  most  effectual 
method  of  preventing  duplication  of  this  kind  is  to 
enter  the  invoice  on  the  copy  of  the  order  in  the  office. 
Investigations  were  then  made  to  see  if  any  questions 
had  arisen  regarding  the  quality  which  would  appear 
when  it  was  checked  against  the  material-received 
sheet.  It  was  also  checked  for  price,  the  extensions  were 
checked,  and  it  was  finally  approved  on  a  form  as 
shown  in  Figure  105. 

A  record  of  prices  was  kept  on  cards  similar  to 
Figure  103  and  an  index  was  kept  of  orders  placed  on  a 
form  as  shown  in  Figure  106.  The  copies  of  unfilled 
orders  were  kept  separate  from  the  completed  orders 
and  as  they  were  comparatively  few  a  general  tickler 
system  was  not  necessary,  as  notes  could  be  easily 
made  of  follow-up  movements  on  the  copies  of  the 
orders  themselves. 

The  stores  system  in  connection  with  this  plant  was 
simple  in  the  extreme.  The  man  in  charge  did  no 
clerical  work  except  make  out  a  list  of  the  material 
and  supplies  received  on  account  of  purchase  orders. 
A  copy  of  this  order  was  given  to  him  at  the  time  it 
was  issued;  he  knew  therefore  what  goods  were  on 
order,  when  to  expect  them,  and  could  stop  any  coming 
in  which  were  not  properly  ordered. 

The  method  of  procedure  was  as  follows:  The 
material  arrived  daily  from  various  sources  and  on 
arrival  was  checked,  weighed,  and  examined  by  the 
storekeeper,  the  copy  of  the  purchase  order  having  of 
course  been  referred  to.  He  then  entered  these  items 
on  the  material-received  sheet,  which  was  sent  into  the 


PURCHASING  AS  PRACTISED 


227 


office  every  day.  He  had  various  shipping  mem- 
oranda and  delivery  tickets  which  came  with  the 
goods.  These  he  kept  for  a  time  in  case  any  question 
should  arise  as  to  quantities,  etc.,  when  invoices  were 
checked. 

During  the  day  the  storekeeper  was  called  on  con- 
tinually to  deliver  goods  from  the  storeroom  to  various 
departments.  This  was  done  by  requisition,  Figure 
107,  signed  by  the  foreman.  The  first  thing  the  store- 
keeper did  on  receipt  of  this  requisition  was  to  num- 
ber it  in  the  top  right-hand  corner  with  an  automatic 
numbering  stamp.  He  then  handed  out  the  material 
and  signed  the  ticket  below  the  foreman's  signature. 
The  requisitions  were  placed  in  a  box  and  sent  into 
the  office  daily.  The  object  of  numbering  them  was 


REQUISITION     ON     STOCKKEEPER 

MATERIAL. 

FIGURE  No.  107. — Foreman's  requisition  on  storekeeper. 


228 


PURCHASING 


that  it  proved  to  the  office  that  if  the  requisitions 
were  numbered  in  proper  sequence  none  were  lost 
after  material  was  given  out.  The  foremen  could 
not  be  depended  upon  to  send  copies  of  requisitions 
to  the  office  to  check  with  the  originals  as  is  frequently 
done.  It  was  essential  therefore  that  close  track  be 
kept  of  them. 

Material  returned  to  stores  was  recorded  in  a  simi- 
lar manner,  the  foremen  sending  credit  memorandums 
to  the  storekeeper  (see  Figure  108). 

On  arrival  in  the  office  these  requisitions  were 
charged  against  the  production  order  and  also  entered 
on  stores  record,  Figure  109,  which  was  a  loose-leaf 
sheet.  They  were  then  tied  in  bundles  and  kept 


FORM    103 

G< 
ORDER    NO. 

DODS     RE 

TURNED 
DAT 

CREDIT 

TO    STOCK    ROOM     FOR    CREDIT 

PIECES 

FEET 

POUNDS 

MATERIAL 

ENTERED    1 

N    STOCK    1 

3OOK 

FOREMAN 

CREDITED 

TO  ORDER 

•TO6KKKKPCN 

FIGURE  No.  108. — Foreman's  credit  requisition  for  material  returned  to  stores 


PURCHASING  AS  PRACTISED 


229 


i  : 


1! 
f  I 


230 


PURCHASING 


until  there  was  no  possibility  of  any  need  to  refer 
to  them  again. 

For  the  size  of  the  establishment  a  large  number 
of  patterns  were  in  use.  A  record  of  these  was  kept 
on  cards,  one  being  a  record  of  the  pattern  itself, 
Figure  111;  this  was  a  buff  card.  The  other  was  light 
blue,  Figure  112,  and  was  used  for  keeping  a  record 
of  the  foundry  the  patterns  were  sent  to.  Enough 
particulars  are  shown  in  the  illustrations  of .  these  to 
make  them  self-explanatory. 


DATE. 


TO   THE    SUPERINTENDENT, 
THE  STOCK  OF 


PATTERN    NO.. 


THE   MINIMUM    BEIT 


.NOW   STANDS   AT. 
_.    IT  TOOK 


TO   GET   DELIVERY   OF   LAST   LOT   PURCHASED. 


FIGURE  No.  110. — Storekeeper's  notice  to  superintendent 
of  low  stock. 


PURCHASING  AS  PRACTISED 


231 


z 

IT 

Ul 

t 

Q. 

• 

Ul 

J              Uj 

X 

z        o 

ID 

Z 

2     * 

K 

-     8 

IT 
Ul 

h 

Q. 

^ 

k            « 

BL 

0          ° 

0) 

or        cr 

Ul            Ul 

I 

ID           ID 

h 

s       z 

D          D 
Z            Z 

o 

o 

t 

Ul 

j 

X 

t 

< 

C 

) 

Ul 

i 

2 

! 

ID 

L 

L  . 

0 

i 

0 

J 

U 

j 

I- 

L 

j 

h 

J 

• 

h 
< 

C 

(0 

h 

C 

| 

0          0 

z       z 

Q 

L 

K 

7 

L 

L 

Q. 

Z           0 

C 

) 

1 

D 

N                ^               Z 

K 

1 

J 

1  !  I 

L 

: 

< 

J 

t 

^ 

OTH  E 

I 

I 
1 

1 

K 
D 

A 

I 


232 


PURCHASING 


Q 

hi 

UZ 

HK 

U 

K 

K 

Q 

c 

Z 
3 

2 

0 

U. 

li 

J 

U 

I 

Q 

<* 

2 

0) 

0 
u 

uz 

i 

u 

1C 

2! 

o: 

> 

u 

0 

j— 

z 

L 

D 

- 

^ 

0 

IL 

Z 

^ 

Z 

a 

0 

0 

o     li 

;  t 

«    < 

u 

< 

ujf 

0) 

2    0. 

z 

INDEX 


Analyses,  relation  to  buying,  92 
value  of,  90 

Bins  and  Shelves,  construction  of,  142 
tickets  and  cards  for,  154,  156, 
157,  158,  190 

Budget  System,  forms  for  use  in  pre- 
paring, 147,  149 

obtaining  material  from  stores 
by,  146 

Buyer  and  Seller,  relations  between, 
21 

Buying,  art   of,   1.     (See  also   Pur- 
chasing,) 

Catalogues,    cases    and   shelves   for 

filing,  76,  79 
index  cards  for,  77,  78 
numbering  and  indexing,  76 
utility  of,  75 
Competitive  Bidding,  23 
Construction  Work,  purchasing  for, 

162,  191,  202 
Contracts,  for  fixed  periods,  196 

price  fluctuations  and,  22 
Costs,  as  affected  by  buying,  13,  14, 
15 

Data,  chart  of  procedure,  in  collect- 
ing 66 

collecting  and  recording,  73 
necessary  in  purchasing  office,  74 
Discounts,    advantage    of    securing, 

114,  116 
reminder  form  for,  121 

Ethics  of  Buying, 

buyer  and  seller,  21 
competitive  bidding,  23 
general  remarks,  19 


Ethics  of  Buying, 

misrepresentation  and,  22 

offer  system  and,  24 

payments  and,  23 

price  fluctuations  and,  22 
Express  Charges,  on  invoices,  131 

Finance,  problems  of,  in  purchasing, 

37,86 
Following  up  Orders.  (See  also  Tickler 

Systems) 

importance  of,  106,  107,  108 
methods  of,  and  forms  used  in, 
108,  109,  110,  112,  199,  212, 
213 

Freight,  checking  charges,  130 
notice  regarding  form  of,  130 

Information,    chart   of   method   for 

securing,  30 
necessary  for  purchasing  agent, 

29 

which  should  be  on  file,  73 
Inspection,  method  of  procedure,  71 
notice  of,  211 
receiving  material  and,  50 
reporting,  92 
result  of  form,  126 
Invoices,  approval  of,  131,  217 

avoiding  duplicate  payment  of, 

117,  225 

cash  discounts,  114,  119,  120 
certifying,  122,  123,  224 
chart   of   procedure   in   dealing 

with,  68 

checking,  extensions,  131 
checking,  freight  charges,  130 
checking,  prices,  129 
checking,  with  inspection  reports, 
126 


234 


INDEX 


Invoices,  checking,  with  material  re- 
ceived, 127 

checking,  with  purchase  orders, 
124,  208 

classification  of,  131 

incorrect,  216 

method  of  handling,  116 

recording  and  registering,  118, 
120,  219 

uniform,  116 

Literature,  on  purchasing,  16 

Manufacturing,   methods  of  buying 

for,  191,  192 

Material,  budget  or  list  of,  146 
form  of  budget,  147,  149 
into    and    out    of  stores.     (See 

Stores) 

receiving,  134,  139 
reporting  receipt  of,    124,    140, 

189 

sent  direct  to  department,  139 
Maximum  and  Minimum,  considera- 
tions affecting,  60,  98,  157,  159 
Misrepresentation,  its  results  in  buy- 
ing, 22 


Offer  System,  its  effects  on  buying,  24 
Orders,  acknowledgment  of,  106 

chart  of  procedure  in  placing,  67 

emergency,  110,  129 

filing,  113,  206 

following  up,  104 

forms  of,  104,  105,  167,  182,  195, 

207,  223 
index  for,  225 

issued  without  price,  114,  209 
method  of  handling,  103 
recording  shipments  on,  111 
requesting  advice  of  shipment, 

110,  112,  195,  197,  207,  223 
tickler  systems,   104.     (See  also 

Tickler) 


Organization,  chart  of,  57 
of  department,  53 
information  clerk,  56 
inspectors,  58 
invoice  clerks,  58 
linking  up  employees  in,  55 
personnel  of,  53 
price  clerk,  57 
requisition  clerk,  56 
storekeeper,  59 
traffic  clerk,  58 

Patterns,  method  of  keeping,  231,  232 
Payments,  advantages  of  prompt,  23 
Personality,  in  buying,  7 
Philosophy,  disadvantage  of  buying 

from  one  source,  6 
obtaining  right  material,  5 
of  buying,  4 

price  and  quality  considered,  4 
Prices,  card  for  recording,  222 
checking,  on  invoices,  129 
final  negotiations  regarding,  100 
fluctuations  in,  22 
for  open  orders,  114,  129 
in  connection  with  requisitions, 

97,98 
obtaining,  after  order  is  placed, 

110 

Profits,  influenced  by  buying,  15 
Purchases,  made  in  the  past,  82 
nature  of,  31 
posting  from  orders,  105 
recording,  83,  84,  85,  201,  218 
substitutes  offered  for,  34 
Purchasing,  an  interesting  economic 

study,  9  y 
art  of,  1 

as  practised,  162-232 
comparison    of    inefficient     and 

competent  methods,  3 
ethical  standards  in,  19 
/functional  position  of,  11 
^  influence  on  profits,  15 
literature  on,  16 
personality  in,  7 


INDEX 


235 


Purchasing,  philosophy  of,  4 

principles  of,  1 

relation  to  cost  and  selling,  13 

some  present-day  methods,  8 

success  due  to,  11 

Purchasing    Agent,     character    and 
make  up,  28 

definition  of  authority,  36 

diagram  of  his  work,  35 

factors  and  conditions  connected 
with  his  work,  26 

functions  covered  by  his  activi- 
ties, 34 

matters  on  which  he  should  be 
posted,  29 

relations  with  other  department 
heads,  38 

synopsis  of  information  necessary 

to,  30 

Purchasing    Department,    chart    of 
functional  organization,  48 

communications     between     de- 
partments, 40 

employees  of,  45 

inspection  division  of,  50 

organization  of,  53 

origin  of,  41,  53 

receiving  division  of,  50 

relations  with  other  departments, 
46 

size  of,  44 

sphere  of  usefulness,  41 

stores  division  of,  50 

subdivisions  of,  47 

Quotations,  comparing,  100,  101 
declining,  100,  102 
keeping  record  of,  89 
negotiations  regarding,  100 
obtaining,  98 

requesting  forms  for,  99,  198 
tabulating,  90 

Receiving,    materials    and   supplies, 

134,  194 
forms  for  goods,  189 


Records,  analyses,  92 

inspection  reports,  92 

past  purchases,  82,  83,  84 

purchase  orders,  85,  86,  88 

quotations,  89,  90 

sources  of  supply,  78 

specifications,  89 

tabulating,  73 

tests,  92 

Requisitions  (Purchase),  chart  of  pro- 
cedure, 67 

examining  and  checking,  97 

factory,  95,  96,  192 

filing  and  final  disposition,  105, 
206 

importance  of  scrutinizing,  203 

making,  at  regular  intervals,  96 

pricing,  97 

remarks  regarding,  94 

work  connected  with,  96 
Requisitions    (Stores),    authority   to 
sign,  general  considerations  re- 
garding, 142,  143 

credit,  forms  of,  145,  146,  188, 
228 

forms  of,  142,  143,  144,  187,  227 


Scrap,  advising  purchasing  agent,  160 

receiving,  into  stores,  158 
Sellers,   recording  standing    of,    80, 

81 

Shipments,    advice    of    approaching 
date,  110 

advice  regarding,  214 

preventing  excess,  124,  138 

recording,  111,  125 

requesting  information  as  to,  112 
Sources  of  Supply,  form  for  recording, 
81 

necessity  for  information  of,  78 
Specifications,  essential  to  good  buy- 
ing, 2 

importance  of  proper,  89,  97 

request  for,  210 

standardizing,  91 


236 


INDEX 


Storekeeper,  his  duties  defined,  59 
Stores,  accounting  system,  150 
bin  tickets,  154,  156,  157, 158 
budget  system,  146 
chart  of  procedure,  69 
credit  requisitions,  145,  146 
deliveries  from,  143 
description  of,  142 
general  remarks,  133 
losses  in,  133 
material  budget,  147,  149 
material  received  into,  134 
material  returned  to,  146 
maximum    and  minimum,   157, 

159 

notice  of  low  stock,  230 
perpetual  inventory,  51, 151, 153, 

229 

production  orders,  160 
proper  storage  methods,  141 
receiving  materials,  134 
recording  receipt  of  goods,  135, 

137 

report  of  low  stock,  159 
requisition  forms  of,  142,  143, 

144 
scrap  advice  to  purchasing  agent, 

160 

scrap  received  into,  158 
tickler  systems  for,  155 
verification  of,  154 


Supplies,  buying  at  regular  intervals, 
96 

standardizing,  43,  91 
System  of  Procedure,   in   collecting 
data  and  information,  65 

chart  of  system,  66 

in  dealing  with  invoices,  69 

chart  dealing  with  invoices,  68 

in  purchasing,  67 

chart  purchasing,  67 

in  stores,  69 

chart  of,  70 

inspection,  71 

traffic,  71 

Testing  Materials,  sending  samples 
for,  138 

value  of,  92 

Tickler    Systems,    for  following    up 
orders,  108 

forms  for  use  in,  109,  110,  112, 
212,  213 

for  stores,  155 

forms  for  use  in  stores,  154,  156, 

157,  158 
Traffic,  checking  freight  charges,  130 

division   of   purchasing   depart- 
ment, 49 

economic  possibilities,  49 

method  of  procedure,  50 

tracer  request,  215 


7s$  *>  i^r^v«5 


14  DAY  USE 

RETURN  TO  DESK  FROM  WHICH  BORROWED 

LOAN  DEPT. 

|l|i|ff    This  bookjs  due  on  the  last  date  stampecNbelow,  or 
|TR!riTR(^thftf^EQr^"bMi^*MiMBu>ri~_    \ 

Renewid  tiMR  IreRftbi 


'JUN8 


w. 


^K&- 


LD  21A-50m-4,'60 
(A9562slO)476B 


General  Library 

University  of  California 

Berkeley 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 

. ..- ,  _ ;  v  . 


